Moving Goal Posts. By Tina Zawila.

As financial advisors we are always encouraging clients to plan for the future, and we give that advice based on what we know today.  Clearly our challenge in providing this advice, is the chance that the “goal posts will be moved” during, or after strategies are implemented.  

Just last week, the Federal Government passed changes to the superannuation system claiming it will save nearly $3 billion and future proof it for decades to come. 

So what are the changes and how will they affect you?

Concessional Contributions into Superannuation

Generally speaking, these are the contributions your employer makes for you under the Superannuation Guarantee scheme plus any contributions you choose to ‘salary sacrifice’, that is, that you contribute from your “before tax” pay.   Right now, those of us aged under 50 can contribute up to $30,000, and the over 50’s, $35,000 in concessional contributions.  However, from 1 July 2017 (just over 7 months away), this limit will fall to $25,000 for everyone.

Non-Concessional Contributions to Superannuation

This is where you contribute to super from your own “after tax money”.  For example, where you make extra contributions from your net pay, or where you may sell an asset and choose to put the cash into super to save for your retirement.  Right now, you can contribute up to $180,000 per year (or bring forward 3 years into one year $540,000), however from 1 July 2017, this limit will fall to $100,000 ($300,000 using the 3 year bring forward rule).  This will significantly reduce your ability to put money into the tax effective investment vehicle we know as superannuation, and also offers an urgent opportunity for anyone wishing to contribute over $100,000 this year, or $300,000 under the bring forward rule, to act before 30 June 2016.

Tax on Superannuation

Most of us pay 15% tax on our superannuation, however, at present if you earn over $300,000 per annum you effectively pay 30% tax on your superannuation investment.  From 1 July 2017 this income level will drop to $250,000. 

Superannuation and financial investing is a complex area, and you should seek professional advice before taking action.  Please call us at Sothertons Gladstone on 4972 1300 if you need assistance planning for your financial future.