There are now only a few months left until the biggest changes in the superannuation rules in many years take effect. Apart from the $1.6 million limit that will apply to retirement pension accounts there will also be much lower limits on contributions.
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The limit on concessional or tax-deductible contributions will be reduced from the current $30,000 for those up to age 49 and $35,000 for those aged 50 or more, to just $25,000 for everyone. Many people in the latter stages of their working lives would like to be able to put more into super not less.
Compulsory employer super contributions began at a low rate in 1992 and only reached the full 9 per cent in 2000 so older workers have only had that benefit for part of their careers. The next few months provide the last opportunity to contribute a larger amount.
Self-employed people over age 50 can make personal contributions that are tax deductible up to the $35,000 annual limit before June 30. This may be a good time to start planning to do that. Employees make their concessional contributions from their pre-tax pay by salary sacrifice.
The total of employer super guarantee and salary sacrifice contributions can be up to $35,000 for older workers. Employees who haven’t already been doing so can consider sacrificing more heavily into super for the next few months to get to the $35,000 limit by June 30.
Even if a large sacrifice contribution each payday would leave them short of income to live on it should still be considered if they have savings in the bank they can draw on.
There will also be new lower limits on non-concessional or non-tax-deductible contributions. These are the contributions people make to get more money into the lowly taxed super environment. The limit is currently $180,000 per year but that will drop to $100,000.
People under 65 can bring forward two year’s contributions for a total of $540,000 this year.
That will drop to $300,000 from July. Those who have lump sums from inheritances or sales of properties, businesses and other assets often use this rule to put lump sums in super.
Those who have large amounts from other sources that they would like to get into the tax–sheltered super area have a short opportunity to do so.
People over 65 can contribute $180,000 if they have worked at least part time in this financial year. They will be limited to $100,000 next year.
From July on, people who have more than $1,600,000 in super will not be allowed to make any further after-tax contributions – their limit will be nil.
Now is their last opportunity.
