27th Jun 2017
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Do your super arrangements need to be reviewed?
time for review salary scarifice

The 1 July changes to super are just days away and you may be caught out if you don't at least ask yourself whether you need to review your current arrangements.

$1.6 million transfer balance cap
The Government estimates that less than one per cent of the population will be affected by this measure. It’s likely that, if you’re one of those lucky enough to have such a balance in your retirement fund, you’ll also have access to the necessary financial advice needed to minimise the effect on any cap. However, it’s always worth asking your financial adviser or accountant about the best way to restructure your finances. 

End of tax exemption on transition to retirement pensions
Transition to retirement (TTR) pensions will now attract 15 per cent tax on earnings, so it’s worthwhile checking if this is still the best arrangement for you. While the removal of the tax exemption may make TTRs less attractive to some, they could still be the right vehicle if you’re looking to work less but maintain your income level.

Reduction of concessional contribution caps
This is likely to be the measure that catches out most people. From 1 July, concessional contributions will be capped at $25,000 for everyone. Those who salary sacrifice should check the total amount being paid into super, as the cap includes the employer superannuation guarantee of 9.5 per cent and any administration fees or insurance premiums an employer pays on your behalf.

Also, note that the concessional contribution counts when it hits your super fund, not when it’s sent. You may be too late if you're looking to take advantage of this financial year’s higher contribution cap.

If you exceed the contribution limits, you can withdraw the extra funds, however, they will be taxed at your marginal tax rate, plus interest.

Reduction of non-concessional contributions
One way of giving your super a boost, especially as you approach retirement, is to make a large non-concessional contribution. This is often done by those who have proceeds from a property sale or have received a windfall, such as an inheritance. Indeed, the bring forward rule, which allows you to make three years worth of contributions in any one financial year, can see your super balance jump considerably. The contribution cap will be reduced from $180,000 to $100,000 a year, but it’s the additional rule that may catch people out.  From 1 July you can only make non-concessional contributions if your super balance is less than $1.6 million.

It’s not all bad news in super – there are two measures that can actually boost your super.

Increased income threshold for spouse contribution tax offset
If you are currently unable to make contributions for your low-income earning spouse due to their actual income, an increase in the applicable threshold. This threshold will be increased from $13,800 to $40,000, meaning the tax offset of up to $540 will be more accessible.

Increased access to tax-deductible contributions
For those who have continued to work long past retirement age, tax-deductible contributions will be available to individuals under the age of 75, including those who are self-employed or employed and don't meet the 10 per cent income test. The work test still applies for those over 65 years of age.

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    COMMENTS

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    floss
    27th Jun 2017
    11:58am
    What is the use of reviewing your super when the rules keep changing.
    Kane Jiang Retirement Planner
    27th Jun 2017
    4:30pm
    Hi Floss, it is most important that you review your strategy especially if you are still in the workforce, ESPECIALLY since they keep changing the rules.
    Rae
    28th Jun 2017
    8:50am
    You have to keep reviewing floss as Kane says.

    There are points when you need to rebalance investments as well. If you don't understand this a fairly priced advisor or planner can be a big help.
    Alexii
    27th Jun 2017
    4:02pm
    That's right, floss. It's rather hopeless.

    I must say that we wouldn't mind being in any of the positions they refer to above but my super is only enough to allow us to get a part pension (greatly reduced by those heinous assets test changes) and no frills for us on our income from the super fund allocated pension.
    Toddy
    27th Jun 2017
    4:43pm
    Read the June article in SuperGuide.com.au
    You will see that the people who benefit the most own their home and have $400,000 in super. They are able to claim 94% of the full aged pension plus get $20,000 from their super per year. They ALSO gat the health care card. The suckers who have $800,000 in super are $ 11000 worse off. Once they have $1050000 in super they will be marginally better off but with NO healthcare card and therefore worse off .....no incentive to save.....should have gone on more holidays!
    Kane Jiang Retirement Planner
    27th Jun 2017
    4:36pm
    To anyone who have used the 3-year bring forward rule recently, watch out! You will fall under the the transitional rules and this is one of the most complex areas I have encountered! If you have used your 3-year bring forward, seek advice as you may be unable to make any extra contribution next financial year (2017/18)!
    Rosret
    27th Jun 2017
    7:06pm
    So what are you saying? If you put the $540K in two years ago or less will it impact the super fund?
    floss
    28th Jun 2017
    9:39am
    Many thanks Kane and Rae you are both correct. Toddy you have picked out the big fault in the new asset test that will destroy retirement for some.I have found out that the data used by C.Link may not have been up to date at the time the new asset test was applied.I think any one effected should lodge for a review as to your assets at that cut off date. Better still the whole thing should revert to the old system and only apply to new clients, as is all super.


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