With 30 June fast approaching, time is running out to make any last super contributions before a raft of important rule changes from 1 July 2017.

Concessional contributions

From 1 July 2017, the concessional (deductible) contributions cap is reducing to $25,000 for everyone. Previously, it was $35,000 for people 49 years and older at the end of the previous financial year and $30,000 for everyone else.  These caps include Super Guarantee employer contributions and salary sacrifice.  If you are self-employed and looking to maximise your contributions for this financial year, so it’s important to check what concessional contributions have been made to all your super funds from 1 July 2016 to ensure you are not in excess.

Maximising the non-concessional bring forward rules

Non-concessional contributions are made after-tax where no deduction is made.  Under the current rules, these contributions can be made at $180,000 per year or 3 years at once brought forward to $540,000.

From 1 July 2017, the annual non-concessional contribution cap will be reduced from $180,000 to $100,000 per year. This will remain available to individuals aged between 65 and 74 years old if they meet the work test.

If you have triggered the bring-forward period in 2015–16 or 2016–17 but you have not fully used your bring-forward amount before 1 July 2017, transitional arrangements will apply. This means that the maximum amount of bring-forward available will reflect the reduced annual contribution caps.  Note that your maximum bring-forward amount in 2016–17 has not changed. It is still $540,000 if you have not triggered the bring-forward rules in 2014–15 or 2015–16.  Besides any large lumps sum non-concessional contributions, it is important to take into account any smaller contributions that may have been made over the past 3 years (eg. To qualify the Government co-contribution), which will form part of the cap.

From 1 July 2017, your non-concessional cap will be nil for a financial year if you have a total superannuation balance greater than or equal to $1.6 million.  In this case, if you make non-concessional contributions in that year, they will be excess non-concessional contributions.

Government Co-contribution

Those looking to qualify for the Government Co-contribution should look to make a non-concessional contribution before 30 June 3017.

To receive the maximum co-contribution of $500 you must contribute $1,000 of after-tax money and earn less than $36,021 during the 2016/17 financial year.  If your income is greater than $36,021, the maximum entitlement will gradually reduce to zero at $51,021 per year.  Age and work tests apply to those between age 65 and 71.

Minimum account based pension payments

For those people with Self Managed Super funds who are drawing an account based pension, remember to make the minimum age-based pension payment before 30 June.  Failure to do so may mean losing the tax-free earning status within the fund.

We strongly recommend seeking advice before making any ad-hoc contributions to super to ensure it is appropriate to your situation.

Daniel Budreika has provided input to a News Corp article reported today on how the ‘2.1 Million small business owners’ may not be able to retire they way they want. This is based on research from MYOB indicating that 50% of small business owners under 50 have done no superannuation planning.

small-business-not-saving-superannuation
Joel Trethowan, who runs marketing and advertising agency Alchemy One, says he didn’t contribute to superannuation as he faced ‘so many other priorities’. Picture: Chris Pavlich

MYOB CEO says: “Our research shows that SMEs believe they will need around $1 million to retire comfortably yet 54 percent of them will not have saved enough when the time comes,” says MYOB CEO Tim Reed. “They will always sacrifice themselves to make sure they pay their employees and their employees’ super first,” he said.

Daniel’s input was that many business owners treated their business as their superannuation, but this was a very risky approach. “It’s risky for people to not put money aside, because their business may not be worth a lot for them to sell when they want to exit.”

The article goes on to interview Joel Trethowan, managing director of marketing agency Alchemy One. He did not contribute to super when he started the business in 2012 because there were “so many other priorities and financial matters.”

Joel went on to explain that: “Cash flow is a constant struggle in the earlier years of business and while super is incredibly beneficial long term, for many small businesses, it’s about year-to-year survival and growth.”

 

 

 

242 Glen Osmond Road, Fullarton SA 5063
Phone: (08) 8333 0790 | Fax: (08) 7200 2647

© 2019 Planning for Prosperity All Rights Reserved • General Advice WarningPrivacy PolicyFSG / Fee Insert • Site Map • Website by VERSION

This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. We strongly suggest that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. You should read the PDS and consider whether the product/s is right for you. Past performance is not a reliable indicator of future performance.

Strategic Advice Solutions Pty Ltd (ABN 86 619 221 662) t/as Planning for Prosperity is a Corporate Authorised Representative
of Infocus Securities Australia Pty Ltd (ABN 47 097 797 049) AFSL and Australian Credit Licence No. 236523