Review your plans and stay on track
From 1 July 2017, a range of superannuation (super) reforms will take effect. For advice on how these changes may affect you, please contact us to arrange an appointment with a Gold Leaf Financial Planner.
It is worth keeping in mind that even with the proposed changes, super is still a great way to save for retirement. Below we outline three important changes that may impact your retirement savings strategies.
1. Super Contribution Changes
Adding additional money to super can make a significant difference to your super balance at retirement. However, on 1 July 2017 the amount of money you can contribute to super without paying additional tax will reduce as follows:
The limit on concessional (pre-tax) super contributions will reduce from $30,000pa or $35,000pa (depending on age) to $25,000pa. An additional 15% tax on concessional contributions will be payable by people with incomes greater than $250,000pa (currently $300,000pa). These changes may impact people who are salary sacrificing to super.
The limit on non-concessional (after-tax) super contributions will reduce to $100,000pa (currently $180,000pa) and $300,000pa when using the ‘bring-forward’ rule (currently $540,000pa). Other conditions will apply.
We suggest reviewing your current super contribution strategy to assess the impact of the new rules. Care should be taken to avoid contributing in excess of the contribution limits as this can result in tax penalties.
2. Transition to Retirement Pension Changes
If you are currently receiving a Transition to Retirement (TTR) pension or have a TTR strategy, there are some changes coming into effect on 1 July 2017 including:
The tax rate payable on earnings from investments held in a TTR pension will increase from 0% to a maximum of 15%; and
The annual cap on concessionally taxed super contributions will reduce to $25,000.
It is important to review your TTR pension and strategy to see whether it is still suitable. Taking action before 30 June 2017 means you could potentially benefit from capital gains tax relief.
3. Super Pensions New $1.6M limit
From 1 July 2017, a ‘transfer balance cap’ of $1.6 million will be introduced that limits the amount that can be held in the retirement (pension) phase of super. It is worth noting defined benefit super funds are also valued and will be included in this limit.
If your total super currently exceeds this limit, or you are unsure if your total super exceeds this limit, it is important to review your super pension balances and consider your options. It may be appropriate to transfer some of your pension money back to the accumulation phase of super to ensure you do not incur a penalty before 30 June 2017. Also, by making changes now you could potentially benefit from capital gains tax relief.
There are a number of other changes to super that have recently passed legislation. If you would like to learn more, we recommend the following resources:
As super legislation and rules continue to change, it is important to review your financial situation and make suitable plans to ensure you stay on track to achieving the retirement lifestyle you want.
A Gold Leaf Financial Planner can assess the impact the super reforms could have for you, and make adjustments to your strategy to minimise tax and make the most of your super for your retirement.
We recommend you review your financial strategy with a Gold Leaf Financial Adviser annually.
Contact us to make an appointment with a Gold Leaf Financial Planner today.
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.
The information in this document reflects our understanding of existing legislation, proposed legislation, rulings, etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.