Time is running out to invest up to $1 million of savings into your super account before 1 July 2017. According to Andrew Meeves, the Principal of Best Business Practice, most people are oblivious to this opportunity.
A couple are currently able to deposit $540 000 each or up to $1.08 million in total under this ‘one million dollar opportunity’. When changes kick in, the “non-concessional” cap will be reduced to $100 000 per annum, from $180 000. There non-concessional contributions (or after-tax contributions) include savings, an inheritance, spouse contributions and property.
Concessional (before-tax) contributions include your employer’s compulsory contributions, additional employer contributions and any salary sacrificed contributions that arrange for your employer to deduct from your before-tax salary. The marginal rate of income tax for concessional contributions will be reduced from $35 000 for people aged over 50 and $30 000 from those under 50 to $25 000 for everyone from July 1. This includes the 9.5% compulsory super paid by employers.
There is a further incentive to get in quickly, as those with super balances higher than $1.6 million will not be able to make non-concessional contributions from July 1. Any contributions made before this time will be able to remain in super and will not be taxed. Those with an excess of $1.6 in their super account will be required to remove the excess super and to place it into an accumulation super account where a 15% tax rate will apply. This may make things tricky for those who are saving heavily for their retirement.
Another change is that the unused concessional cap may be carried forward to up to five years, meaning that up to $125 000 can be contributed to super over five years provided that the superannuation balance does not exceed $500 000. This will take effect from July 1 2018.
There will also be a tax break for those under 74 who will be able to claim a deduction for personal contributions into super, up to the $25 000 concessional contributions cap, including compulsory super contributions. This will also be helpful for contractors, part-time workers and the self-employed who will be able to make personal contributions, without requiring an employer to do this on their behalf.
There are good reasons to get in quickly, before July 1, to save tax on super contributions.
If you need help setting up a self-managed superannuation fund, contact our friendly accountants at Best Business Practice on 02 6672 6700.