Significant reductions to Concessional (pre-tax) Contributions Caps for Super come into effect on 1 July 2017, which means you have a closing window of opportunity to take advantage of the current pre-tax contribution limits.
Importantly, if you have salary sacrificing arrangements in place, you will also need to review your contributions strategy to align with the reduced contribution caps and avoid penalties.
If you want to make the most of your Super and retirement planning before the changes come into effect, you need to act now.
Currently you are able to contribute up to $30,000 in pre-tax contributions each year (or up to $35,000 if you are over 50). From 1 July 2017, this cap will be reduced to $25,000 per annum regardless of your age.
Pre-tax contributions, or Concessional Contributions, include the 9.5% compulsory Super Guarantee contributions from your employer, contributions made through salary sacrificing and personal deductible contributions.
To make the most of your Superannuation savings and retirement planning before the rules change, we have highlighted what you need to do, but time is running out, so you must act quickly.
What you need to do
- Review: Check your current pre-tax Super contributions to ensure you will not exceed $25,000 from 1 July 2017. You need to consider your employer Super Guarantee contributions as well as any salary sacrifice or other personal contributions. Penalties will apply if you exceed the $25,000 per annum cap after 1 July 2017.
- Take advantage of current contribution caps: Make the most of the existing concessional caps before they are reduced. You only have couple of months to contribute up to $30,000 (or $35,000 if you are over 50) before June 30 2017.
- Be prepared: Concessional Contributions to Super are generally taxed at 15%, however higher income earners pay 30%. From 1 July 2017, the income threshold for paying the higher tax on Concessional Contributions will be reduced from $300,000 to $250,000. You need to consider events which may affect your income such as capital gains or redundancy payments. If you exceed the income threshold you will receive a Division 293 Notice (which can be issued more than 12 months after you have exceeded the income threshold). If you are affected by the reduction in the income threshold and will be liable to pay additional tax, you may need to review your Superannuation and retirement strategy.
- Keep records: It is expected that a Concessional Contribution catch-up provision will be introduced in 2019/20 for those with an account balance of less than $500,000. This means you can contribute any unused pre-tax contribution allowances for a period of up to 5 years. Being prepared can help you utilise this provision when it is introduced.
As leading SMSF experts and Superannuation strategists, we are able to offer services and expertise in all areas of Superannuation including SMSF advice and structuring, SMSF investment strategy, Limited Recourse Borrowing Arrangements, Pension and Centrelink strategies and Estate Planning. We are CPA accredited SMSF specialists and registered ASIC SMSF Auditors.
There are many other significant changes to Super which come into effect from 1 July 2017, which may affect your retirement planning strategies. If you would like assistance to understand what these changes mean for you and to help you make the most of your Superannuation, please contact us today on 03 9708 8801 or email firstname.lastname@example.org
General Advice Disclaimer: The information contained within this document is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Robinson Voss Partners (RV Partners) strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.
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