With June 30 fast approaching many Australians should be reviewing their superannuation strategies. Many people should take action before the new rules apply in July.
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Contribution limits will see big reductions. Tax deductible contributions (employer, salary sacrifice and personal) will be reduced from $30,000 for those under age 50 and $35,000 for those older to $25,000 for all.
Those most likely to be affected are people in the latter stages of their career who were planning to make catch-up contributions over their remaining working years to reach an adequate retirement savings total. This is their last opportunity to contribute the larger amount.
One strategy people can use to get closer to the current limit is to arrange to sacrifice all their salary for the remainder of the financial year into super, if they can afford to go without that pay.
The limit for non-tax deductible contributions will be cut from $180,000 per year to $100,000. These are the contributions people make when they have large sums available from inheritances or the sale of other assets.
Those under 65 will still be allowed to bring forward two years of future contributions but people with large sums available should consider getting them into super before the limits are cut.
People with pre-retirement pensions including those using transition to retirement strategies need to review their position. These pensions will have a new 15 per cent tax on their earnings.
If people have met a condition of release such as having retired, or changed jobs after age 60, their accounts can remain tax free. To avoid the tax they will need to notify their super fund manager of their circumstances.
People under age 60 who cannot avoid the tax will usually be best to roll their pension account back to accumulation mode to reduce the total tax they pay. Professional advice can help work this out.
There has been much publicity about the new $1.6 million pension account limit. People affected by this need to act and should be consulting their advisers now. Those with self-managed super funds have an opportunity to reduce future capital gains tax.
All the usual pre-June 30 options are available. Self-employed people should be arranging contributions now. Spouse contributions allow a person to contribute up to $3,000 to their low income spouse’s super and reduce their tax bill by $540.
The government co-contribution allows low income earners who put $1,000 into super to get an extra $500 contribution from the Government. Professional advice can help people make the most of these opportunities.