Changes to the superannuation rules will come into effect on 1 July 2017.
While the government will reduce the amount of money you can put into super from 1 July this year, the good news is that you could still take advantage of opportunities before the financial year ends.
Contribute more in before-tax (concessional) super contributionsShow more
The before-tax super contributions cap will be reduced from $30,000 per year (or $35,000 if you’re turning 50 or over before 1 July 2017) to $25,000 per year, for everyone, irrespective of age.
This means, depending on your circumstances, there is an opportunity to contribute an additional $5,000 (or $10,000 if you’re turning 50 or over) in before-tax super contributions than what will be possible before the cap is lowered on 1 July 2017.
Contribute more in after-tax (non-concessional) super contributionsShow more
The after-tax super contributions cap will decrease from $180,000 per year to $100,000 per year.
This means, depending on your circumstances, you could contribute $80,000 more in after-tax super contributions than what will be possible when the after-tax super contributions cap is reduced on 1 July 2017.
If you’re under age 65, you could also bring forward three years’ worth of after-tax contributions up to a maximum of $540,000, which is much higher than the $300,000 limit that will also apply from 1 July 2017.
Another thing to note is that from 1 July 2017, individuals with a total super balance of $1.6 million, or above, will not be able to make any further after-tax contributions. This means the current financial year may be the last opportunity where you can make an after-tax contribution to your super.
Some higher income earners will need to pay additional taxShow more
From 1 July 2017, those earning at least $250,000 (including your income before tax, as well as your before-tax super contributions) will pay an additional 15% tax on any before-tax contributions. This is on top of the concessional rate of 15%, bringing the tax rate to 30%.
Currently, this tax only applies to those earning $300,000 and above.
Transition to retirement pensions will lose their tax exemptionShow more
Investment earnings on super fund assets that support a pension are currently tax free. However, this will no longer apply to transition to retirement (TTR) income streams from 1 July 2017.
Earnings on fund assets supporting a TTR income stream will be subject to the same maximum 15% tax rate that applies to accumulation funds.
There will be changes for defined benefit fund membersShow more
Defined benefit pensions where income payments are over $100,000 per year will be subject to additional tax from 1 July 2017.
For taxed defined benefit pensions, 50% of income payments in excess of $100,000 per year will be considered taxable income, and will be taxed at your marginal tax rate.
For untaxed defined benefit pensions, the 10% tax offset that applies to income payments will be capped at $10,000 each financial year.
Before-tax (notional) contributions to certain public sector funds will also count towards your before-tax contributions caps. If you plan on making contributions to other funds, this may impact you.
Why super matters
Australians are living longer and with many needing to fund a longer retirement as a result, adding to your super could make a difference to the lifestyle you lead in the years after you finish working.
To put it into perspective, September 2016 figures, provided by the Association of Superannuation Funds of Australia, show individuals and couples, around age 65, who are looking to retire today, need an annual budget of $43,372 and $59,619 respectively to fund a comfortable lifestyle. These figures assume individuals and couples own their home outright and are in relatively good health.1
By comparison, the maximum annual Age Pension rate for a single and couple is currently $22,804 and $34,382 respectively2, keeping in mind not everyone is eligible for government assistance.
Other key things to keep in mind
- If you contribute money to super that exceeds the super cap limits, additional tax and penalties may apply. You can find out more at the ATO website.
- The value of your investment in super can go up and down. Before making extra contributions to your super, make sure you understand and are comfortable with any risks associated with your chosen investment option. Learn more.
- The government sets general rules about when you can access your super. Generally you can access it when you’ve retired and reached your preservation age, which will be between 55 and 60 depending on when you were born. Learn more.
- There are other ways to help boost your super. Learn more. There may also be benefits to making spouse contributions. Learn more.
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The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures.
Important informationShow more
Any advice in this page is general in nature and is provided by AMP Life Limited ABN 84 079 300 379, AFS Licence No. 233671 (AMP Life). The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on this advice you should consider the appropriateness of this advice having regard to those matters and consider any relevant product disclosure statement before making any decision. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
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