Once upon a time, the rules governing superannuation didn't change all that often. Year after year they would stay more or less the same, with maybe a little tinkering at the edges. It made sense. After all, superannuation is the longest held investment most of us will ever have. It's hard to plan for forty years down the track when you're not sure what the rules will be forty weeks from now.
Sadly successive governments have become addicted to pulling and prodding at the superannuation rules and the 2017/18 financial year is no different.
A flat and lower concessional cap
Under the previous structure people over the age of 50 had a concessional contributions cap of $35,000 and those under 50 had a cap of $30,000. Now the cap for everyone is $25,000 regardless of age.
That doesn't mean that it might not still be a smart financial strategy to put more than $25,000 extra into super, but you need to be aware of the extra tax you'll be exposed to.
Div 293 is a tax applied to the concessional contributions of people on high incomes. In simple terms, it levies an additional 15% on concessional contributions up to the cap (which is now $25,000 for everyone).
This threshold used to be triggered once an individual earned $300,000 in any financial year, but now kicks in at $250,000. Again, this isn't to say that making those extra contributions isn't worthwhile, but the additional tax liability needs to be factored in.
The other thing to consider is that it's not just income that contributes to the threshold - investment losses like a negatively geared rental, and salary packaged fringe benefits and super are also included.
The reason it's so important to know how these changes will affect you, is that any contributions in excess of the cap will attract 46.5% tax - the highest marginal rate.
Of course, if you're earning over $250,000 that's already the tax rate for a fair percentage of your income, but if you've been planning with the expectation of a different tax environment, it could significantly impact on the end result.
The other thing to watch out for is salary packaging. Many Queensland Health employees can salary package up to 2% additional super, with the government matching that contribution. If you're already close to your cap that might push you over the edge.
As with any change in financial circumstances whether they're personal or regulatory it's important to sit down with your advisor and find out how they will specifically affect you.
The good news is that these changes will affect the returns that will be lodged next year, so it's the perfect time to seek advice.
And if you happen to find yourself sitting next to the Federal Treasurer at dinner, you might want to politely ask if he can please leave super alone in next year's budget.
|Tags: News Tax superannuation Planning|
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