This year, there’s more to the new financial year than Christmas-in-July parties and recipes for mulled wine.
1 July marks the start of a raft of new super rules. While it’s easy to leave super in the too-hard basket, the changes are significant for some Australians.
Ignoring them could cost you money, so it’s worth taking a moment to check your situation.
If you’re not sure whether they apply to you, we’ve put together a short quiz to find out.
Below is a summary of the key changes.
Changes to before-tax contributions
The annual cap for everyone is now $25,000. This means if you want to add extra money to your super, from your pre-tax salary, there is a new, lower limit.
For people aged 48 and under, the cap was previously $30,000 and for people aged 49 and above, it was $35,000.
From next year (1 July 2018), there is scope to contribute more than the cap if you haven’t used it all in previous years. Speak to an adviser about this to make sure you understand the details.
There is also a new ability to claim a tax deduction on contributions if your employer doesn’t let you salary sacrifice (i.e. pay extra super from your pre-tax pay).
Tax rates will also go up if you earn over $250,000, so make sure you review your contribution strategy if you’re in this bracket.
Changes to after-tax contributions
If you pay extra into super from your after-tax salary, the cap will reduce to $100,000 per year or $300,000 over three years (if certain conditions are met).
Before now, it was $180,000 or $540,000 respectively.
A better deal for spouses
Until now, there were tax offsets for spouse contributions where their income was less than $13,800 – that limit has now gone up to $40,000. This means the tax benefit it is available to far more families than previously, and is particularly helpful if one partner works part-time but wants to top up their super.
$1.6 million lifetime cap
One of the headline-grabbing changes is that individuals can only have $1.6 million in tax-free pension account. Before now, there was no limit; after 1 July, people with more than the cap will need to reduce their balance to avoid financial penalties.
Any amount over this can be held in an accumulation account – which is still super, but with tax rates applying.
Transition to retirement pension
Until now, people on a TTR pension paid no tax on their earnings; now it will attract a 15% tax.
If that all sounds confusing, why not talk to an expert? Get in touch with a Yellow Brick Road adviser today.