Make the most of this financial year’s super caps

Building your retirement nest egg? Make your contributions before the end of the financial year and you could potentially save more.

Changes to super laws mean that from 1 July 2017, the amount of money you can contribute to your super is being reduced. So it makes sense to take advantage of higher caps on super contributions before the financial year ends.

But first, here’s a summary of the changes to super caps.

WHAT’S CHANGING?

There are 2 types of contributions you can make to your super:

  1. concessional (before tax): and
  2. non-concessional (after tax).

CONCESSIONAL (BEFORE TAX) CONTRIBUTIONS

Concessional contributions are taxed in the super find at a maximum rate of 15% (or 30% for some people who earn a high income¹). This tax rate in super is likely to be lower than your marginal tax rate of up to 49%² that would be paid on salary or other sources of taxable income.

In the current financial year, these contributions are capped at $35,000 pa if you were 49 years of age or older on 30 June 2016 and $30,000 pa for everyone else.

From 1 July 2017, the cap reduces to $25,000 pa for everyone. If your cashflow allows, you may want to take advantage of the higher cap that applies until 30 June 2017.

NON-CONCESSIONAL CONTRIBUTIONS

In the current financial year, non-concessional contributions are capped at $180,000 pa or $540,000 if you bring forward up to two years’ worth of contributions. Other conditions apply (www.ato.gov.au).

From 1 July 2017, the maximum non-concessional contributions you can make is $100,000 or $300,000 by bringing forward two years’ worth of contributions. However, non-concessional contributions will not be able to be made if you have a total superannuation balance (accumulation and income streams) over $1.6 million.

If you have sufficient money available that you would like to contribute to super, you may want to make non-concessional contributions before 30 June 2017 to take advantage of the higher cap.

ADVICE CAN HELP

Finding it hard to keep up with our changing super system? We can help you ensure your super strategies are up to date with changing rules.

For more information on investments, superannuation and retirement planning or to have a chat about how we can help you have a financially secure future, please contact Fionne McKillop at McKillop Financial Planning on (02) 9542 2904 or email fionne@mckillopfp.com.au

Fionne McKillop is a director of McKillop Legal Pty Ltd and as a result, will receive distributions and/or other benefits from McKillop Legal.

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¹ Individuals with an income above $300,000 (in 2016/17) will pay an additional 15% tax on personal deductible and other concessional super contributions. This income threshold will reduce to $250,000 from 2017/18.

² Include Medicare levy and the Temporary Budget Repair levy of 2% on taxable income exceeding $180,000.

DISCLAIMER

Content contained in this document is general information only and is not advice, financial planning, legal or otherwise.

This document was prepared by Integrated Planning Systems Pty Limited ABN 21 051 429 184 trading as McKillop Financial Planning, an Authorised Representative of GWM Adviser Services Limited ABN 96 002 071 749 trading as MLC Financial Planning, Australian Financial Services Licensee, 105 – 153 Miller St, North Sydney NSW 2060, a member of the National Australia Bank Group of companies. The information is current as at 19 May 2017.

The article does not take into account your personal objectives, financial situation or needs. Accordingly, you should consider how appropriate the information is to you with regard to your personal circumstances. You may wish to obtain an adviser’s assistance, tax and/or legal advice to make this assessment. Before buying any financial product, you should read the Product Disclosure Statement (PDS) for that product and consider the contents of the PDS before making a decision about whether to acquire the product.

Opinions constitute our judgment at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia Group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility of errors or omissions for this document.

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