Carrying on from our first blog Superannuation Reform 2017 Overview, we wish to inform how you will be affected when the new superannuation legislation takes effect from 1 July 2017.
The information contained in this paper is of a general nature and does not take into account your personal circumstances. Please consult with your financial adviser before making any decisions based on the information contained in this document.
Concessional contributions allowed
The concessional contributions allowed as a tax deduction for FY17 is:
- $30,000 for those under 49 years of age
- $35,000 for those aged 49 years or over on the last day of the previous financial year
From 1 July 2017, a concessional contribution cap of $25,000 will apply regardless of age.
From 1 July 2017, any person under 75 who makes personal contributions (including those aged 65 to 74 who meet the work test) to claim an income tax deduction for any personal superannuation contribution into an eligible superannuation fund. These amounts will count towards the individual’s concessional contribution cap, and be subject to 15% contributions tax.
Also being introduced from 1 July 2018, is the ability for people with a superannuation balance of $500,000 or less to accrue additional concessional cap amounts. Individuals will be able to access their unused concessional contributions cap space on a rolling basis for a period of five years. Amounts that have not been used after five years will expire.
Example of how superannuation contributions will apply
Megan is a 42 year old earning $100,000 per year. She has a superannuation balance of $400,000. In 2018-19, Megan has total concessional superannuation contributions of $10,000.
In 2019-20, Megan has the ability to contribute $40,000 into superannuation, of which $25,000 is the amount allowed under the annual concessional cap and $15,000 is her unused amount from 2018-19 which has been carried over. The full $40,000 will be taxed at 15% in the superannuation fund.
Please note that for the above to apply you need to ensure that at the most recent 30 June date, your superannuation balance did not exceed $500,000.
For more information, please contact Ian Walker from Archer Gowland ianw[@]archergowland.com.au.