Have you got your head around the new superannuation rule changes?
While much has been written about the new superannuation laws coming into effect on 1 July 2017, it seems many people are still confused or don't completely understand the changes.
But it is imperative that you seek urgent advice as many of the changes will require completed action no later than 30 June.
They will also need to conform precisely with the legislation as well as meet your superannuation strategy.
In a nutshell, eight of the major changes are:
1. Non concessional contributions
The new rules will reduce the annual non concessional contribution (NCC) cap from $180,000 to $100,000.
While this in itself will limit people's retirement income, which is the very thing governments should be embracing, the additional punitive $500,000 limit may well see many Australians no longer able to make further NCCs beyond this year.
What this means is that any contributions must be made and in your superannuation bank account by 30 June.
While any interest expense on borrowed monies to make a NCC is not tax deductible, it may be worthwhile borrowing and not claiming an interest deduction if you anticipate a cash amount in the near future.
2. Prepay contributions
If you are in businesses, you can prepay your next year's super contribution.
However, next year's limit decreases to $25,000 for all eligible contributors, and you will not be able to contribute additional sums next year.
3. Consider re-contribution
If you and your spouse have vastly different balances where one partner is above the new $1.6 million cap and the other is well below, then look at a withdrawal and re-contribution strategy if in pension mode.
Also, if your spouse earns less than $10,800, or up to $13,800 (pro-rated), you can put $3,000 into their super fund and get up to a $540 (18 per cent) tax offset.
The $3,000 needs to be an after-tax (non-concessional) contribution into their super fund to be eligible for the tax offset.
4. Move to pension phase
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If in a transition to retirement (TTR), earnings will be taxed in super from 1 July. You should consider moving to a full account based pension if permissible.
Many members may also be able to move from TTR to an account-based pension if their age or work circumstances allow, thus retaining the tax-free status in super.
5. Contribute asset sale proceeds
If you have made a capital gain on a sale of an asset outside super then look at a further concessional contribution into super to your maximum caps to help reduce any tax impost.
6. Review salary sacrifices
If you have a salary sacrifice agreement with your employer you will need to review it in light of the lower concessional caps from 1 July.
7. Consider heirs
While not strictly tax, if you have a binding death nomination and no longer wish someone to be part of a death distribution, you will need to replace it as a will or marriage does not supersede it.
8. 30 June deadline for deposits
Any contributions to super, either concessional or non concessional, must be recorded in the superannuation bank account by 30 June and not merely paid – it must be deposited and reflected in the bank balalnce.
This also applies to your employer contributions, which could have dire consequences with the introduction of reduced caps.
Some of these superannuation changes are complex, so it's imperative that you access professional advice.
It's even more urgent because we are only a few days from the start of the financial year.
The bottom line is that you should act now if you want to have your affairs in order by 1 July.
The above information is general in nature and not intended to be taken as advice. Any information contained in this analysis has been prepared without taking into account your objectives, financial situation or needs and is considered general in nature. Before acting on any information contained herein we recommend that you consider whether it is appropriate for your circumstances. Please discuss with your licensee's adviser before acting on any of the information. If this analysis contains reference to any financial products we recommend that you consider the Product Disclosure Statement (PDS) or other disclosure document associated with the product before making any decisions regarding any products.