The super reforms introduced in the 2016 Federal Budget are set to start coming into effect from 1 July 2017. So what are the changes to the super contributions caps, and how will they affect your savings.
Non-concessional contributions cap set to fall
For most super savers, one key change is the reduction in the non-concessional contributions cap.
What are non-concessional contributions? They are simply extra contributions you make to your super from your after-tax income, as well as those your spouse makes for you. They’re also a very popular option for investors looking to top up their super before they retire.
Current rules allow you to make non-concessional contributions of up to $180,000 a year, or $540,000 by using the ‘bring-forward rule’ to combine three years’ worth of caps in a single year. But from 1 July 2017, the annual cap will be reduced to $100,000. That will reduce the maximum contribution under the bring-forward rule — from $540,000 to $300,000. Under the new rules, you’ll also be unable to make further non-concessional contributions once your total super balance reaches $1.6 million.
This means the coming months are your last chance to make the most of the higher caps.
Changes to concessional contributions cap
And it isn’t just the non-concessional contributions cap that is falling. If you rely on salary sacrifice to boost your super, you may also be affected by the new cap for concessional contributions — super contributions made from your pre-tax earnings. Currently capped at $30,000 a year for those under 50 and $35,000 for people aged 50 or more, concessional contributions will be limited to $25,000 a year for all super investors from 1 July 2017. That’s a far cry from the $100,000 limit that used to apply to the over 50’s only eight years ago.
The silver lining is that the Government has also moved to allow savers to carry forward any unused concessional cap amounts for up to five financial years. Set to come into effect from 1 July 2018, this change will apply to people with total super balances of less than $500,000. That could make a big difference if you’re looking to make up for lost time — if you’re returning to work after having children, for example.
Speak to a Roberts & Morrow Financial Planning Adviser if you have any questions or would like to know more. They can give you more detailed information on the best approach for your situation.
General Advice Warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.