Make the most of your super before 1 July 2017 changes
The government is reducing the amount of money you can put into super from 1 July 2017. So now is a good time make the most of your super before the changes kick in.
What you could do
Here are a few ideas that may help you, depending on your personal situation.
- Make more before-tax contributions
The cap for before-tax super contributions 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, no matter your 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 at the end of the 2016 financial year.
- Make more after tax contributions
The cap for after-tax super contributions will decrease from $180,000 per year to $100,000 per year. This means you have until 30 June this year to take advantage of that extra $80,000.
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 apply from the 2017 financial year.
3 Key points to keep in mind
Everyone is different, so you’ll need to think about whether or not these options are right for you. Following are some key things to keep in mind.
- When you convert your super into a pension from 1 July 2017 there’ll be a limit of $1.6 million for your tax-free pension account, not including subsequent earnings. So if you already have more than that, you’ll need to keep the excess in a super account (where earnings will be taxed at the concessional rate of 15%), or you’ll need to take it out of super completely.
- If you contribute money to super that exceeds the super cap amounts, it will be taxed at a higher rate and an interest penalty will 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.
- 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.
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.