Super Changes – What You Need to Review Before 30 June!
With end of Financial year just around the corner it is time to review and upskill about the new financial lingo in the Superannuation System and how these changes will impact you.
While the Federal Government keeps using the Superannuation System to balance the Federal Budget, you need to keep a flexible approach.
So welcome to the New Super System and my top 5 things to understand before 30 June:
1 – Review Salary Sacrifice
If you are salary sacrificing to superannuation you need to ensure you are within the new $25,000 Concessional Contribution limit. This limit includes your employer Super Guarantee Contributions as well as any Salary Sacrifice. If you have extra savings before 30 June you could put up to $30,000 (if you are under 49) or $35,000 if you are over 50.
For those in the Public Sector Defined Benefit Schemes (PSS, CSS, MilSuper and DFRDB) you will need to review as new ‘notional employer contributions’ will apply and limit what you can salary sacrifice into other super accounts.
2 – Understand the Transfer Balance Cap
The new $1.6 million Transfer Balance Cap kicks in from 1 July. This means there is a limit on the total amount of tax free super than an individual can keep in “Pension Phase”. The transfer balance cap will apply to those already retired and then those who retire from 1 July.
If you have a balance over $1.6 million in Pension Phase you will need to reduce this balance. You can either transfer the excess amount back to Accumulation Phase or remove the excess amount.
The impact is an increase to paying 15% tax on earnings. Review your numbers now and do not make any decisions without the right advice.
The Tax Office will apply penalties to amounts over $1.6m in Pension Phase after 30 June.
3 – Review and understand the Non-Concessional contribution limits
The annual limit of $180,000 per person of tax free contributions will reduce to $100,000 from 1 July. You can also access the bring-forward rule of $540,000. This will reduce to $300,000 after 30 June this year.
4 – Review existing Transition to Retirement Strategies
The assets in your super fund used towards Transition to Retirement Pensions will no longer be tax exempt from 1 July 2017. If you are using this strategy consider whether a transition to retirement pension is still appropriate. It is important to run your numbers and review the strategy as it may still be viable!
5 – Review your Binding Nominations and Estate planning
“The Superannuation System was never designed to be an Estate Planning vehicle!” As part of the changes some binding nominations and reversionary pension benefits become invalid.
This is a good time to check your estate plan. Make sure your Wills, Enduring Power of Attorney and Binding Nominations are all up to date and represent your wishes.
Seek out further advice and start your journey to being free around your money and creating wealth with understanding.
Scott Malcolm has been awarded the internationally recognised Certified Financial Planner designation from the Financial Planning Association of Australia and is Director of Money Mechanics. Money Mechanics is a fee for service financial advice firm who partner with clients in Melbourne, Canberra and Sydney to achieve their life and wealth outcomes. We are authorised to provide financial advice through PATRON Financial Advice AFSL 307379.
The information provided on this article is of a general nature only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information you should consider its appropriateness having regard to your own objectives, financial situation and needs.