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SUPER CHANGES

LIMITED OPPORTUNITY TO MAXIMISE YOUR NON-CONCESSIONAL CONTRIBUTIONS INTO SUPERANNUATION BEFORE 30 JUNE 2017

By James Malliaros

Following on from last week’s email on maximising concessional (pre-tax) contributions into superannuation, this week’s email looks at maximising non-concessional or after tax contributions into superannuation.

What are non-concessional contributions?

Non-concessional super contributions are those on which no tax deduction is claimed. They can be either in the form of cash or off-market transfers of shares and property into superannuation.

The non-concessional contribution limits – now and from 1 July 2017

Non-concessional contributions are limited to $180,000 per person per financial year until 30 June 2017:

  • If you currently aged under 65, you can contribute up to $540,000 this financial year by choosing to bring forward the next two years contribution limits/li>
  • If you trigger the bring forward provision at under age 65, you do not need to meet any work test requirements for the period when you may be over age 65

However from 1 July 2017 non-concessional contributions will be limited to $100,000 per person per financial year:

  • If you are aged under 65, you can contribute up to $300,000 in the one financial year by choosing to bring forward the next two years contribution limits
Other considerations
  • If you have previously triggered the bring forward provision since 1 July 2015, but the full $540,000 amount has not been used, then the bring forward cap available in future financial years will be reduced, as follows:
    • Triggered in 2015/16 – $460,000 transitional cap = $180,000 (15/16) + $180,000 (16/17) + $100,000 (17/18)
    • Triggered in 2016/17 – $380,000 transitional cap = $180,000 (16/17) + $100,000 (17/18) +$100,000 (18/19)

In addition, those who are approaching a total superannuation balance of $1.6 million will have their ability to use the bring forward rule reduced:

  • Where a superannuation balance is between $1.4 million and $1.5 million the bring forward rule will be limited to a maximum of $200,000
  • Where a superannuation balance is between $1.5 million and $1.6 million the bring forward rule will be limited to a maximum of $100,000
  • Finally, under the new superannuation rules, non-concessional contributions cannot be made where an individual’s total superannuation balance is in excess of $1.6 million

These rules are summarised in the table below:

Advantage of making non-concessional contributions into superannuation

Unlike pre-tax concessional contributions, non-concessional contributions are not taxed when deposited into superannuation and count towards the tax-free component of your superannuation benefit.

In addition, given the relatively small cap on concessional contributions, non-concessional contributions are a way of significantly boosting your superannuation savings for retirement.

Superannuation is one of the most tax effective ways of building wealth for your retirement. The tax rates imposed on superannuation funds are as follows:

  • Investment income is taxed at a maximum of 15%;
  • Capital gains are taxed at a maximum of 10% provided the asset has been owned by the superannuation fund for at least 12 months; and
  • When an Account Based Pension income stream is commenced upon reaching preservation age, the tax rate imposed on income and capital gains in the pension account is reduced to zero:
    • Pension payments are also tax free for those aged 60 and over – for those between 56 and 59, pension payments (less any tax free amount) will be taxable and receive a 15% tax offset
Action required

If you believe that you have scope to make non-concessional contributions before the end of the Financial Year, then you will need act quickly. Given that there are less than two months in the Financial Year left, we suggest this is attended to as a matter of urgency.

Remember, you can make non-concessional contributions either via cash or the transfer of personal shares into superannuation. However, the transfer of personal shares may have Capital Gains Tax consequences, so we strongly recommend that you seek our advice on this.

If you need assistance in understanding how much you may have already contributed, and how much more you can contribute to reach your cap, please contact us.

James Malliaros
Senior Financial Planner
SMSF Specialist Advisor™
Authorised Representative No. 291633

If you have any questions or comments, please email me at james@gfmwealth.com.au

Disclaimer: This document is not an offer or invitation to any person to buy or sell any interest in or deposit funds with any institution. The information here is of a generic nature, and does not take into account your investment objectives or financial needs. No person should act upon this information without firstly seeking competent, professional advice specifically relating to their own particular situation.

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