MONEY MATTERS: Review of Super contributions is needed soon

Only three and a half months now remain for savers to review their superannuation strategies and make changes to improve their position before the new rules come into effect in July.

There will be a new limit of $1.6 million on the amount investors can have in retirement pension accounts.

Any excess will need to be moved into an accumulation account subject to 15 per cent tax. People with super balances under the new limit may be well served by making a large contribution before June 30.

The current $180,000 annual contribution limit will be cut to $100,000 and the bring-forward rule will only allow $300,000 to go in instead of the current $540,000.

The limit for tax-deductible contributions will drop to $25,000 for all.

Self-employed people can make personal contributions and claim deductions. Business people using companies can have their companies contribute for them.

Employees can make salary sacrifices to maximise contributions. For some it may make sense to sacrifice all their salaries until June 30.

People using transition-to-retirement pensions who have retired or met a condition of release need to advise their provider to avoid the new 15 per cent tax that will apply to these pensions.

Should investors with more than $1.6 million in super withdraw the excess, or do nothing? Or should they add to their super before June 30 if they have the money to do so?

Many factors will influence this decision including the investors’ marginal tax rate.

If they are paying no tax it may make sense to withdraw the excess amount to avoid the tax. However if they are paying a higher tax rate it may be smart to add to super beyond the $1.6 million pension account limit while they can.

This will boost their investments in the lower 15 per cent tax area. People under age 65 can contribute up to $540,000 to super, and those older, up to $180,000.

From July anyone with more than $1.6 million in super cannot contribute any after-tax amounts.

This is the last chance to contribute more.