From July 1, 2017 there will be significant limits placed on how much you can contribute to your super. So before then you need to seriously consider if you can make the most of the more generous amounts now available.
The maximum amount you can add to your super from your before-tax earnings will drop to $25,000 (for all age brackets). It is now currently $30,000 (or $35,000 for those 50 or older this financial year). Note that these figures include the compulsory contribution your employer makes and personal contributions where you claim a tax deduction.
For after-tax (non-concessional) contributions to your super, the maximum amount drops from $180,000 to $100,000.
If you have the means available and have been considering making extra additions to your super, these next few weeks look set to be the last chance in your working career to make such big contributions.
Why would you?
- Concessional (before-tax) contributions may be a tax-effective way to top up your super, as the percentage of tax paid on these is often less than you will pay in income tax.
- If you have recently come into significant funds from an inheritance, divorce, property settlement, or similar, you can take advantage of this great opportunity.
- It is likely these tighter restrictions on what you can add to your super will remain, meaning the next few months really is the last opportunity to contribute at these levels.
You can contribute up to $540,000
There is a provision in the super contribution rules which means if you are under age 65, you can bring forward three years of contributions.
This applies to after-tax (non-concessional) contributions. So if you want to roll three years’ contributions into one that will be a maximum of $540,000 you’re allowed to add to your super. From July 1, 2017 that roll-over amount will be cut down to $300,000.
What is a concessional contribution?
Also known as before-tax contributions, concessional contributions include your employer’s compulsory contributions (Super guarantee), any additional employer contributions, any salary-sacrifice contributions that you arrange for your employer to deduct from your before-tax salary. Essentially they’re super contributions that are made before your pay check hits your bank account, hence ‘before tax’. Personal deductible contributions also count as a concessional contribution.
Arranging a salary-sacrifice contribution with your employer may be a particularly effective way to accelerate your savings. These contributions are generally taxed at only 15 per cent (up to the concessional contributions cap) – often less than the income tax rate you currently pay. Because of this, making additional concessional contributions may be really tax-effective.
What is a non-concessional contribution?
This type of contribution is commonly known as an after-tax contribution. These are contributions you make from your take-home salary, spousal contributions or contributions made to take advantage of the government’s co-contribution scheme. As you’ve already paid income tax on this money, these contributions aren’t taxed again .
How do I contribute?
- To make a concessional (before-tax) contribution, speak to your employer about a salary-sacrifice arrangement
- For non-concessional (after-tax) contributions, ANZ Smart Choice Super customers can make a contribution via an easy BPay payment.
Biller Code – 169060
Reference Code – Member number (This is your ANZ Smart Choice Super BSB and account number.)
Before taking action, it’s important to be aware of the current caps and seek advice if you’re unsure what measures to take.