There are a number of groovy strategies that are available to SMSFs. A popular strategy is contributions to SMSFs. Contributing more to your super is a great strategy to increase your retirement saving as well as shield you from paying extra tax. However, there are some changes in regards to the contribution caps taking effect from 1 July 2017, which should be brought to your attention.
Concessional Contribution Cap
A new concessional contribution cap has been introduced from 1 July 2017. Before this date, you were allowed to contribute $30,000 per year at a concessional tax rate if your age was under 49 years old, compared to $35,000 per year if you were over 49 years old. In 2017-18 financial year, the contribution cap reduces to $25,000 regardless of your age. However, the good news is, from 1 July 2018, you will be able to carry any unused portion of your concessional contributions cap forward for five years-on a rolling basis-provided that your super balance is less than $500,000. The table below summarized the main changes.
| Concessional contributions | |||
| 2016-17 FY | Age<49 | $30,000 | |
| Age>49 | $35,000 | ||
| 2017-18 FY | Any age | $25,000 | |
| From 2018-19 FY | Any age | Super Balance<$500,000 | $25,000 but allowed to carry forward unused portion |
| Super Balance>$500,000 | $25,000 | ||
Excess concessional contributions (ECC) charge will be applied when you go over the concessional contribution cap. The excess amount will be included in you assessable income and taxed at your marginal tax rate.
Non-concessional Contributions Cap
Regarding non-concessional contribution cap, before 1 July 2017, if your age was under 65, you were allowed to contribute up to $180,000 per year or utilise a bring forward amount of $540,000 over a three-year period. From 1 July 2017, the cap is reduced to $100,000. Members under 65 will have access to use the cap over 3 years provided their super balance less than 1.4 million. As the super balance increases, the cap which can be accessed decreases, until the super balance of 1.6 million is reached. For the members over 65, no access to future years’ cap is allowed.
| Non-concessional Contributions | |||
| 2016-17 FY | Age<65 | Regardless of Super Balance | Access to $540,000 cap (over 3 years) |
| 65<Age<75 | $180,000 | ||
| From
2017-18 FY |
Age<65 | Super Balance<$1.4m | Access to $300,000 cap (over 3 years) |
| $1.4m< Super Balance<$1.5m | Access to $200,000 cap (over 2 years) | ||
| $1.5m< Super Balance<$1.6m | Access to $100,000 cap (over 1 year) | ||
| Super Balance>$1.6m | Nil | ||
| 65<Age<75 | Super Balance<$1.6m | $100,000 | |
| Super Balance>$1.6m | Nil | ||
A tax of 47% will be levied on the excess amount over the non-concessional contribution cap.
As you can see – the reduction in contribution caps for both concessional and non concessional contributions will have a major impact on your contributions and tax management strategy. Its important to take note of the changes and ensure these are not exceeded at any time.
Important disclaimer:
Please note this article is for information purposes only and does not constitute financial product or legal advice. The content has been prepared without taking account of the objectives, financial situation or needs of a particular individual and does not constitute financial product advice
Ivan Filipovic is authorised through Dover Financial Advisers Pty Ltd – Australian Financial Services Licensee -License No. 30748 – Dover Authorised Representative Number 1244358 – Redwood Wealth Pty Ltd – Dover Corporate Authorised Representative Number 1244359
Ivan Filipovic is a leading Specialist Superannuation and Property Advisor with Redwood. Ivan has almost 20 years experience providing a range of services across all sectors of Self Managed Superannuation, Property and Finance with an emphasis on long term wealth strategies. Ivan has been educating and coaching investors and has built a successful property portfolio with a number of positive geared properties across Australia. Ivan provides detailed strategies at https://redwoodadvisory.com.au/. Ivan is a Chartered Accountant, ASIC registered auditor, Mortgage Broker and Licensed Property Professional.
Leave a Reply