The clock
is ticking on
super changes

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.

Need help?

The team at AMP can assist by putting you in touch with a financial adviser in your area, or by talking you through some of the details regarding the changes. Call today on 131 267 or request a call back at a time that suits you.

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What you could do before the changes come in

Contribute more in before-tax (concessional) super contributions

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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 contributions

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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.

Everyone’s different, so you’ll need to consider your own circumstances and think about whether or not these options are right for you. See other important considerations below.

What else you should be aware of

A pension cap of $1.6m will come into effect

If you’re converting your super into a pension, from 1 July 2017 you’ll be restricted to a limit of $1.6 million in your tax-free pension account, not including subsequent earnings.

If you already have more than that, the excess will need to be placed back into the super accumulation phase (where earnings will be taxed at the concessional rate of 15%), or taken out of super completely.

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.

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.

Pensions

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.

Contributions

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.

Where to go for more information

You’ll need to consider your own circumstances and before making any decisions, it’s a good idea to speak to your financial adviser.

If you don’t have an adviser, you can give AMP a call on 131 267 or use our find an adviser tool to locate a professional in your area.

For more details on super reform, check out our News&insights article 'Proposed changes to super pass through parliament'.

Making a super contribution

If you’ve considered your own circumstances and you’re an existing AMP customer, you can:

  • Make a before-tax contribution by contacting your employer, human resources or payroll department.
  • Make after-tax contributions, which can generally be done via BPay. You can find your biller code and customer reference number (CRN) on your most recent annual statement. You can also find these details online via My AMP - Login > Super > I want to contribute to my super > One-off contribution.

Contributions must be received by 30 June 2017 to take advantage of existing cap rules.

Want to talk to an expert?
Call AMP on 131 267 or request a call back.
We can also put you in touch with an adviser.

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1 https://www.superannuation.asn.au/resources/retirement-standard

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.

2 https://www.humanservices.gov.au/customer/services/centrelink/age-pension

Important information

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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.

AMP Life is part of the AMP Group and can be contacted on askamp@amp.com.au. If you decide to purchase or vary a financial product, AMP Life and/or other companies within the AMP Group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.