Planning more important

SUPERANNUATION planning over the next week has never been more important because a raft of changes from the last two Federal Budgets come into effect on July 1.

Major changes come with the government lowering how much you can contribute from this year on so you really need to see how this affects you and how to best take advantage of it before changes actually happen.

I can’t stress enough that if you have been using superannuation as your primary wealth building platform, you need to talk to your accountant or financial advise because planning strategies will change significantly.

The new cap of $1.6 million a person of super investments may need people to rethink their plans. It can be complex so you need advice.

Investments in superannuation above that new level will still enjoy a range of attractive tax concessions … just not as attractive as previously.

Concessional super contributions are typically those that you claim as a tax deduction such as your 9.5% super guarantee contributions or salary sacrifice.

For those under 48 years of age the maximum amount you can contribute will fall from $30,000 this year to $25,000 next financial year and for those aged 49 or over, their current limit of $35,000 will also drop to $25,000.

The penny pinching doesn’t stop there. A lot people contribute extra superannuation which doesn’t qualify for a tax deduction because investment returns under the super umbrella receive tax concessions.

In other words, while there is no tax advantage to the extra contributions, there are tax advantages on the returns while it’s in there.

The limit for these “non-concessional” contributions has been $180,000 for a number of years but from July 1 it will drop to $100,000.

There is also a ‘bring forward rule’ for those that had a lump sum, from an inheritance or sold a property for example, where you can 3 years worth of non-concessional contributions all at once. That’s 3 times $180,000 or $540,000.

With the reduction of the non-concessional limits that “bring forward rule” maximum drops to $300,000 as of July 1.

The gender gap in superannuation is still because women historically have a lower average salary and in many cases may also take some time off work to raise children.

As a result they do retire on a lower average account balance.

For couples, when you retire you both want to make use of the retirement benefits under super so it is worthwhile to both have decent levels of super not just one.

Spouse contribution splitting can help.

This is where you can split the concessional, or pre-tax contribution, to your partner.

The only unusual point on this though is that you only nominate how much you want to split in the year after. So this year you look backwards to last year/s contributions and split them.

When it comes to Self Managed Superannuation Funds there are some interesting changes that are worth noting.

Apart from the changing contribution and bring forward rules, which apply to everyone, there are some tweaks to transition to retirement rules and the continuing crackdown on holding art and collectables in the investment portfolio.

They must be held in a vault and specifically can’t be stored in a related-party’s private residence for enjoyment. So no more paintings hanging up at home if they are owned by your Self Managed Super Fund.