How the changes to super can boost your savings
As of July 1, drastic new changes to superannuation will kick in, and they will affect all Australians. As we outlined in April, one of the most significant changes is the new annual after-tax (non-concessional) contributions cap of $100,000, replacing the current $180,000 cap.
However, there is a loophole in the three-year bring-forward rule, Noel Whittaker reveals. “Provided you are eligible, you can still contribute $540,000 ($180,000 a year for the next three years) even though the number will be just $100,000 a year after June 30,” he explains in the Sydney Morning Herald. This could be especially important if you have a large superannuation balance, because no non-concessional contributions will be allowed after June 30 for anyone with $1.6 million or more in super.”
Essentially, this means if you’re in a couple where one partner has a significantly larger super balance than the other, you could withdraw as much as $540,000 from the larger balance and deposit it as a non-concessional contribution to the smaller balance.
“This strategy has a dual benefit – it maximises the amount able to be held in the zero-tax pension environment after June 30, and converts a significant portion of the taxable component to non-taxable,” Whittaker says. “This means less death tax if the superannuation is left to a non-dependent.”
In another big change, the current cap of $35,000 a year for over-50s for concessional contributions will drop to $25,000 a year for everybody after June 30. “If you have the funds available, and are in a situation where you can claim a tax deduction immediately, you could consider making a concessional contribution sooner rather than later,” Whittaker advises.
“This reduction in the concessional contribution cap has huge ramifications for anybody who is salary sacrificing to the maximum. This financial year your limit is $35,000, next financial year it's $25,000.”
However, if this is something you’re considering, you need to get in quick. The funds must be received by your super fund by midnight on Friday, June 30.
Make sure you discuss all financial options with a qualified advisor and tell us in the comments below, what are your thoughts on the changes?