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Changes to Superannuation - Contributions - Part 6 of 6

By Adele Wardley, A Squared Advisers Pty Ltd

Did you know from 1 July 2016 if you have $1.6 million in superannuation you will not be able to make further non-concessional contributions to your superannuation fund? 

Many of our clients, particularly our doctors and dentists are being caught by these changes. So, what are the new rules, and what should you be doing now?

Reduction to the concessional superannuation contribution limit

From 1 July 2017 the concessional contribution limit will decrease to $25,000 for all taxpayers eligible to contribute to superannuation. Until 30 June 2017 the concessional contribution cap is $30,000 for members who were younger than 49 years of age on 30 June 2016 and $35,000 for members who were age 49 or older on 30 June 2016.

Remember concessional contributions are contributions for which you as the taxpayer, or your employer, claims a tax deduction for the contribution. 

Reduction to the non-concessional superannuation contribution limit 

From 1 July 2017, members who have superannuation balances on the previous 30 June of $1.6million or greater will not be able to contribute any further non-concessional contributions to superannuation. 

This allows significant opportunity for some members to make a final non-concessional superannuation contribution prior to 30 June 2017, provided they are eligible to contribute and have not already exceeded their cap. If you think this may be of benefit to you, please contact Adele Wardley of A Squared Wealth to enable us to advise you in relation to this contribution.

Until 30 June 2017 the non-concessional contribution cap is $180,000 per annum, or $540,000 over a three-year period for members aged under 65 (special rules apply).

From 1 July 2017 the annual non-concessional contribution cap is $100,000 per annum. 

For individuals wishing to bring forward some non-concessional superannuation contributions (and are aged under 65 at the time of making any contributions) the following rules will apply from 1 July 2017:

Total Super Balance
Total Superannuation Balance (at 30 June of previous financial year) Contribution and bring forward available
Less than $1.4 million Access to $300,000 cap (over three years)
Greater than or equal to $1.4 million and less than $1.5 million Access to $200,000 cap (over 2 years)
Greater than or equal to $1.5 million and less than $1.6 million Access to $100,000 cap (over 1 year)
Greater than or equal to $1.6 million Nil

 

Complex transitional rules also exist where a superannuation fund member has triggered a bring forward period (that is by making a non-concessional contribution of more than $180,000) in either the year ended 30 June 2016 or ending 30 June 2017. If this applies to you, please contact us so we can advise you of the new rules.

10% test abolished for concessional contributions 

Until 30 June 2017, to be eligible to claim a deduction for personal superannuation contributions taxpayers must meet what is commonly called the ‘10% test’ which requires the taxpayer to have no more than 10% of their income sourced from employment income. Total income for the purposes of the 10% test is assessable income plus reportable employer super contributions (salary sacrificed superannuation contributions) plus reportable fringe benefits. 

From 1 July 2017 this test will be abolished, making it easier for taxpayers to make a deductible contribution to superannuation. 

We note that in order to make a concessional superannuation contribution a taxpayer must:

  • pay the contribution to a complying fund
  • be eligible to contribute to the fund (generally aged under 65, or aged under 75 and satisfies the work test)
  • have sufficient taxable income to enable the contribution to be deducted (you cannot use a superannuation contribution to create a tax loss)
  • lodge an election with your fund within the required time frames to deduct the contribution (a section 290-170 notice) and receive a written notice the fund has received the members election.

This is a positive and welcome change as it will give all taxpayers a greater ability to make concessional contributions to superannuation.

Catch up Contributions

From 1 July 2018 further measures have been introduced to enable taxpayers who have not maximised their concessional superannuation contributions in the 2019 and later years to ‘catch up’ these contributions. There will be no real benefit to taxpayers until the 2020 year at the earliest.

What should I be doing now?

If you expect to be impacted by the changes, the very best thing you can do is to seek advice, and to seek it early. These changes come into force in only four months and we all know how quickly time passes by.

A free seminar is being held by A Squared Wealth at 3/84 The Boulevarde Toronto on Thursday 16 March at 9am. You can book a place here to find out more about the changes.

Alternatively A Squared Wealth, an Authorised Representative of Politis Investment Strategies Pty Ltd ABN 71 106 823 241 AFSL 253125, is able to provide a personalised statement of advice for you. Appointments can be made by calling 4959 3882 or emailing adele@asquaredwealth.com.au.

Disclaimers

This information is provided by A Squared Advisers Pty Ltd.

The information provided to you above is purely factual in nature and does not take account of your personal objectives, situation or needs. The information is objectively ascertainable and, therefore, does not constitute financial product advice. If you require personal advice you should consult an appropriately licenced or authorised financial adviser.