The changes to superannuation in the last 12 months are significant and require extra care. The concessional contribution cap will be reduced to $25,000 per annum from 1 July 2017.
The concessional contribution cap for the 2016-17 financial year is $30,000 if you’re under 50 and $35,000 if you’re aged 50 or over. Concessional contributions include any contributions made by your employer, salary sacrificed amounts and personal contributions claimed as a tax deduction by self-employed or substantially self-employed persons.
Similarly, from 1 July 2017 the annual non-concessional (post-tax) contributions cap will be reduced from $180,000 per annum to $100,000 and the three-year bring-forward provision reduced from $540,000 to $300,000. There will also be an additional constraint that individuals with a balance of $1.6 million or more will no longer be eligible to make non-concessional contributions. As such, you may wish to consider making the maximum allowed non-concessional contribution before the caps are reduced and the maximum threshold applied from 1 July 2017.
High-income earners are also reminded that the contributions tax on concessional contributions is effectively doubled from the normal 15 per cent rate to 30 per cent if their combined income plus concessional contributions exceeds $300,000. The threshold for the higher rate of tax will be reduced to $250,000 from 1 July 2017.
Importantly, don’t leave it until 30 June to make contributions, as your super fund may not receive the contribution in time and it will then count towards next year’s contribution caps, which could result in excess contributions and an unexpected tax bill.
Self-employed tax-effective superannuation contributions
A self-employed person will be able to claim contributions to a complying superannuation fund as fully tax deductible up to the age of 75 in the 2016-17 tax year. However, such contributions will only be deductible if less than 10 per cent of the total of a person’s assessable income, reportable fringe benefits or reportable employer superannuation contributions is attributable to their status as an employee. Such a deduction cannot increase or create a tax loss to be carried forward. Employers can also claim deductions for superannuation contributions made on behalf of their employees.
Consolidate your super
For most employees it makes a lot of sense to have your entire super in one place. You’ll reduce the amount of fees you’re paying, receive one lot of paperwork and only have to keep track of one fund.
Consider consolidating the super funds you do have into one fund. Compare your funds to work out which best suits your needs. Important things to look at are fees and charges, available investment options and life insurance cover. You can look at past investment performance as well – but remember, it is no guarantee of how the fund will perform in the future.
Once you have chosen the fund you want to keep, contact the provider, which will help you to transfer money from your other super funds. If you have moved around or changed jobs occasionally, your old super fund may have lost track of you and there is a risk you may miss out on some super when you need it.
To find lost superannuation create a myGov account and link it to the ATO.