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Last chance to make up to $540,000 in super contributions before the cap drops in July!

Article By | | Financial Planning

From 1 July 2017, the Government will lower the annual non-concessional (after tax) contributions cap to $100,000 and will introduce a new constraint such that individuals with a balance of $1.6 million or more will no longer be eligible to make non-concessional contributions.

Rules

Individuals aged under 65 can currently make non-concessional contributions of $180,000 per year, or $540,000 every three years, which will remain in place until 30 June 2017. The changes will see the annual non-concessional contributions cap lowered to $100,000 with a three year bring forward of $300,000 for those aged under 65. This is a significant drop of $80,000 per year or $240,000 every three years and will mostly affect those who have excess cash outside of superannuation. As is currently the case, individuals aged between 65 and 74 will be eligible to make annual non-concessional contributions of $100,000 if they meet the work test (that is they work 40 hours within a 30-day period each income year), but will not be able to access the bring forward of contributions.

Strategies

The opportunity exists for individuals to utilise the $540,000 bring forward rule this financial year before the changes come into effect. This will allow you to move significantly more of your assets into superannuation than you will after 1 July 2017. In particular, if you are over the $1.6 million cap this will be your last chance to make non-concessional contributions.

Who is affected?

Individuals with cash or assets (note some assets may be able to be transferred to a super fund) outside of superannuation, wanting to move as much of their assets as possible into the low tax superannuation environment. Despite the other changes to superannuation, it remains a very tax effective vehicle and people preparing for retirement should be considering how to put as much in as possible.

What to do

Well in advance of 30 June 2017, you should consider if there is cash or assets outside superannuation that could be moved into superannuation and then discuss if it is appropriate with a financial adviser. It is important that you seek advice early as there are a number of considerations including access to money, estate planning and future tax planning to be taken into consideration before making any large contributions.

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