What you need to do ahead of the July 1 superannuation changes
AMP financial adviser Mark Haynes is a Certified Financial Planner (CFP) and Principal of Adelaide-based Haysman Financial Services. He specialises in retirement planning, superannuation and self-managed super.
Big changes to super rules in Australia are kicking in on July 1, so if you’re already retired or getting closer to it then you have just a small window of opportunity to get a substantial lump sum into your super and reap the current tax advantages.
The new wide-ranging rules – only passed in parliament in November 2016 – are the most significant changes we will have seen to super since 2007. This time, however, there’s not a lot of time to act.
Let’s take a look at the key changes you need to be prepared for – the reduction of the after-tax super contributions cap and introduction of a $1.6 million non-concessional contribution limit – which could make all the difference to your lifestyle in retirement if you seek the right advice over the next few months.
Non-concessional caps changes
From July 1, an annual after-tax (non-concessional) contributions cap of $100,000 will apply, replacing the current cap of $180,000. If you are under 65, you currently have an opportunity to bring forward three years’ worth of after-tax contributions, so up to $540,000 each into super or up to $1.08 million per couple. After July 1, however, you will only be able to bring forward a maximum of $300,000 each under the new bring-forward rules.
After-tax, or non-concessional, contributions could include money contributed from an inheritance, a redundancy payout or the sale of shares or property and money from savings. Let’s say you were already planning on selling an investment property or perhaps downsizing your family home later this year – it could be well worth bringing forward this sale and putting any lump sum proceeds into your super before July 1.
If you are still working and salary sacrificing into super, it’s also important to know the cap for concessional contributions (pre-tax contributions) also will be lowered from 1 July 2017 from the higher $35,000 limit (for over 50s) to $25,000 regardless of your age, which will include the 9.5 per cent compulsory super paid by your employer.
The new $1.6 million non-concessional contribution limit
If you’re fortunate to have saved well over the years into your super for your retirement and built up a substantial super balance, there’s another good reason why you should take action before July 1. After this, anyone with a total super balance above $1.6 million simply won’t be allowed to make after-tax (non-concessional) contributions at all.
However, if you make after-tax contributions before July 1 that take your balance above $1.6 million will be able to stay in super.
What’s important to remember is that everyone’s circumstances and goals for their retirement are different, which is why it’s crucial to be talking to a professional financial adviser right now about how to make the most of your super and its tax benefits before July 1.
*Mark Haynes is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.
Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.