Act now and make the most of it before the proposed super changes

THE Commonwealth Government announced substantial changes to the superannuation system at the 2016 federal budget.

While the government has since amended some of the proposed changes, now’s the time to make the most of existing concessions before new rules come in.

Please note changes to the super system have yet to be finalised and must be passed by the Senate before they become law.

What’s changing?

At the May budget the federal government announced it was lowering the amount of money Australians can contribute to their super fund on both a pre-tax and after-tax basis.

The government has proposed lowering the amount investors can contribute to their super fund on a non-concessional basis – that is, from after-tax dollars – to $100,000 a year from 1 July 2017.

At the moment, eligible people can contribute $180,000 a year into their super fund from after-tax funds.

However, the bring-forward rules are still in place. This means that after 1 July 2017 eligible investors can bring forward three years of non-concessional contributions totalling $300,000 and add this amount to their super fund without falling foul of non-concessional caps.

This allows super fund members who may have sold an asset to contribute the proceeds from the sale to the super environment, up to available limits.

Nevertheless, the government wants to limit contributions by people whose super balance is close to $1.6 million.

Aside from the non-concessional contributions, changes have also been made to the concessional contributions investors can make to their super fund.

At the moment, eligible people over the age of 50-years can contribute up to $35,000 to their super fund each year from pre-tax earnings. This figure for people 49-years and under is $30,000. From 1 July next year this amount will drop to $25,000 for everyone.

Taking action

Given the proposed changes to the super system, now is the time to take advantage of the higher limits before the new, reduced amounts come into play.

Some investors may already have been part way through a strategy to contribute up to the $540,000 amount to their super fund when the new rules were announced.

Anyone in this situation should talk to their financial adviser about the best possible way to contribute the maximum amount to their super fund and still say inside the rules.

Investors, especially those who are near retirement, should consider making the most of the current concessional cap before this limit drops back to $25,000 for all investors on 1 July 2017.

The super system is complex and ever-changing. So it’s worth seeking guidance from a respected and experienced financial planner to ensure you are making the most of the concessions offered through the super system, but are still complying with the law.

If you would like to find out more, call Adam Douglas at MyState Wealth Management on 1300 651 600 or visit mystate.com.au/wealth

Information is current as at 18 October 2016. This is general advice only. Before making any decisions please speak with a MyState Wealth Management Financial Planner.