The Latest Changes to Your Super
Late last year, legislation was passed through Parliament which gave effect to the announcement made by the government in relation to superannuation rules. The May budget proposed changes to the superannuation rules which were subsequently amended in September and have now been made law.
The following changes to superannuation will come into effect from 1 July 2017.
Concessional (pre-tax) contributions
- Current rule - $30,000 annual contributions cap ($35,000 if you were 49 or over on 30 June 2016). Contributions are taxed at 15% if your total income (including concessional contributions) is under $300,000; 30% if you earn more than $300,000.
- New rule - $25,000 annual contributions cap, regardless of age. 30% tax on contributions starts once you earn $250,000 or over.
Non-concessional (after tax) contributions
- Current rule (up to 30 June 2017) - $180,000 annual non-concessional contributions cap. ‘Bring forward’ rule allows up to three years’ worth of contributions (ie: up to $540,000) to be made before 30 June 2017 up to age 65.
This financial year will be the final opportunity for individuals to contribute at these levels. From 1 July 2017, the rules change and the non-concessional cap will be reduced. If you do not utilise the entire 3 years’ worth of contributions then any future contributions will be reduced to the new limit as discussed below.
- New rule (from 1 July 2017) - $100,000 annual non-concessional contributions cap. The ‘bring forward’ rule allows up to $300,000 to be made any time during a three year period if under age 65. This rule substantially reduces the amount of non-concessional contributions individuals can make.
If you have already made use of the bring forward rule in a previous year you must wait two years before you can make further non-concessional contributions. If you have only used part of the bring forward rule, you can make further contributions in a subsequent year up to the maximum amount.
No non-concessional contributions are permitted if your total super balance at the start of the financial year is $1.6 million or more.
If you think these changes may affect your current superannuation strategy and you would like advice on the best way to take advantage of the contribution limits before the changes take effect on 1 July 2017, please call our office on 02 8852 5900.