Don't get distracted by super changes
..... super fund members from focusing on their contribution strategies for 2016-17.
The two proposed measures getting much of the attention are the indexed $500,000 lifetime cap on non-concessional contributions (intended to include contributions from July 2007) and the reduction of the annual cap on concessional contributions to an indexed $25,000.
As these proposals work through the parliamentary process, we can expect much more debate and commentary along the way.
In the meantime, life goes on for super fund members and so should their strategies to contribute to super where appropriate.
Many fund members would now be thinking and taking specialised advice about whether the Budget's super proposals are really going to affect them over the next year or so even if passed into law in their present form. Much will depend on a member's personal circumstances and the particular proposals in question.
First regarding the proposed $500,000 lifetime cap on non-concessional contributions, which is proposed to take effect from Budget night, May 3. (The Government wants the lifetime cap to replace the standard $180,000 non-concessional annual cap.)
A call to the tax office will readily give fund members the total of their non-concessional contributions made between July 2007 and June 30, 2015. And your super fund can immediately provide a list of any subsequent non-concessional contributions. A financial adviser could, of course, also provide you with this information.
Fund members who have made extra-large non-concessional contributions in the past or are intending to do so are particularly likely to consider gaining professional advice - especially if the contributions will take them close to the planned lifetime cap.
Regarding the proposal to reduce the annual concessional cap from $30,000 currently for members aged under 49 (or $35,000 for members 49 or over) down to $25,000.
Critically, the Government proposes that this measure come into effect from July 2017. This means, of course, that members can maximise their concessional contributions in 2016-17 within the existing larger caps.
And before being worried about the possible impact on your contributions in 2017-18 and beyond, it is worth reviewing how much you have typically contributed as concessional contributions in past financial years. Concessional contributions comprise super guarantee, salary-sacrificed and personally-deductible contributions (where applicable).
By Robin Bowerman
Principal & Head of Retail, Vanguard Investments Australia
26 July 2016