New laws effective 1 July will limit the amount that goes into super. Are you prepared for the changes?
Following last year’s Federal Budget, new superannuation rules will take effect on 1 July 2017.
After 1 July, the amount of after-tax contributions you’ll be allowed to make to super will be limited and your super balance will be capped for good. As you only have a short time to consider whether you’ll take advantage of the opportunities still available, here are some things to consider.
How will the new super rules affect you
From 1 July, you’ll be unable to put as much money into super as you can right now.
Super is likely to remain one of the most tax-effective ways to invest but with some contribution caps set to reduce by nearly 45%, less money will be allowed to benefit from the tax concessions on offer.
From 1 July, you’ll only be permitted to add up to $100,000 in after-tax dollars per year. That’s because the non-concessional contributions cap is lowering from the current cap of $180,000.
Act well before 1 July
There are two key things to consider right now: the current non-concessional contributions cap of $180,000 per year and the three-year rule that could allow you to add three years’ worth of non-concessional contributions before 1 July.
That means you could potentially add $540,000 into your super—or an adjusted amount if you’ve already made a non-concessional contribution within the last three years. You must be under 65 to take advantage of this current ruling, and you must act before 1 July.
Right now, you’re allowed to contribute up to $540,000 into super but after 1 July, you’ll be limited to an annual amount of $100,000 or $300,000 in a three-year period.
It’s likely you won’t have $540,000 lying around but because this may be the last chance for so much of your money to benefit from super’s tax-concessions, it’s worth considering whether you can transfer the value of other assets into super.
Property or shares?
If you hold shares outside of super, you may want to consider whether your investment will give you more down the track if held within super where it can benefit from generous tax concessions.
Or you may have plans to sell an investment property or downsize your own home and the timing coincides well with the changing rules allowing you to transfer your money into super and boost your balance well before the closing date.
Now is a good time to think about how to structure your investments so you receive better value down the track.
Boost your balance until 30 June
After 30 June 2017, if the total amount you hold in super exceeds $1.6 million you won’t be allowed to make further contributions without tax penalties. But before that time your balance is unrestricted thanks to the current rules.
You now have a small window of time left to boost your super so your money can benefit from the tax leniency that applies in super.
We encourage you to act now so you can explore your options in time.
Act now, before it’s too late
There are other upcoming changes to super including changing tax rules for transition-to-retirement pensions and restrictions on before-tax contributions (concessional) caps.
It’s a good time to start a conversation with us so you can be confident in your understanding of the current and changing rules that will affect you. We look forward to speaking with you soon.
You need to consider with your financial planner (or adviser), your objectives, financial situation and your particular needs prior to making an investment decision. Sensibly Pty Ltd and its authorised representatives (or credit representatives) do not accept liability for any errors or omissions of information supplied on this website
Nick Shanley, Steve May, Luke Styles and Shanley Financial Planning T/A Steve May Financial Services are Authorised Representatives / Corporate Authorised Representative of Sensibly Pty Ltd, AFSL 533923. Please refer to our website at www.stevemayfs.com.au to reference our Financial Services Guides.
