Don't get distracted by super changes

 

It is understandable that the continuing widespread coverage of key federal Budget proposals for super may distract some .....

..... super fund members from focusing on their contribution strategies for 2016-17. 

 

 

The two proposed measures getting much of the attention are the indexed $500,000 lifetime cap on non-concessional contributions (intended to include contributions from July 2007) and the reduction of the annual cap on concessional contributions to an indexed $25,000. 

As these proposals work through the parliamentary process, we can expect much more debate and commentary along the way.

In the meantime, life goes on for super fund members and so should their strategies to contribute to super where appropriate. 

Many fund members would now be thinking and taking specialised advice about whether the Budget's super proposals are really going to affect them over the next year or so even if passed into law in their present form. Much will depend on a member's personal circumstances and the particular proposals in question. 

First regarding the proposed $500,000 lifetime cap on non-concessional contributions, which is proposed to take effect from Budget night, May 3. (The Government wants the lifetime cap to replace the standard $180,000 non-concessional annual cap.) 

A call to the tax office will readily give fund members the total of their non-concessional contributions made between July 2007 and June 30, 2015. And your super fund can immediately provide a list of any subsequent non-concessional contributions. A financial adviser could, of course, also provide you with this information. 

Fund members who have made extra-large non-concessional contributions in the past or are intending to do so are particularly likely to consider gaining professional advice - especially if the contributions will take them close to the planned lifetime cap. 

Regarding the proposal to reduce the annual concessional cap from $30,000 currently for members aged under 49 (or $35,000 for members 49 or over) down to $25,000. 

Critically, the Government proposes that this measure come into effect from July 2017. This means, of course, that members can maximise their concessional contributions in 2016-17 within the existing larger caps.

And before being worried about the possible impact on your contributions in 2017-18 and beyond, it is worth reviewing how much you have typically contributed as concessional contributions in past financial years. Concessional contributions comprise super guarantee, salary-sacrificed and personally-deductible contributions (where applicable).

 

By Robin Bowerman
Smart Investing 
Principal & Head of Retail, Vanguard Investments Australia
26 July 2016

  • The real value of advice

    The right words of advice - whether it be from friends or family, business mentor, sports coach - can have lasting impact on the way we lead our lives, manage our businesses. The same holds true for financial advice.

  • Taking a deeper dive into indexation of the transfer balance cap

    With the recent indexation of the general transfer balance cap causing discussion around its complexities, technical experts take a deeper look into what will happen on 1 July.

  • ASIC sounds warning around high-yield bond scams

    The corporate regulator has warned of a rise in scammers targeting Australian investors by pretending to be associated with well-known domestic and international financial service firms.

  • How to pass the diversification test

    Diversification, spreading your money across a range of different assets rather than putting it all into one place, is one of the core principles of investment risk management. That's because investment returns from different assets are never consistent.

IT Financial Services, ABN 48 097 884 976, is an Authorised Representative of Apogee Financial Planning. Apogee Financial Planning Limited ABN 28 056 426 932 is an Australian Financial Services Licensee and has its registered office at 105 - 153 Miller Street North Sydney NSW 2060. A member of the National group of companies.