Concessional contributions will decrease but eligibility to contribute will be broadened.
From 1 July 2017, the concessional contribution cap will be reduced to $25,000 from $30,000 (under 50s) or from $35,000 (50s plus). Currently, an income tax deduction for personal superannuation contributions is only available to people who earn less than 10 per cent of their income from salary or wages. This restriction will be lifted so that both employer and personal deductible contributions may be made up to the combined limit of $25,000.
Unfortunately, the work test will still apply for individuals between 65 and 74 years of age.
The double contribution strategy will still be available whereby an additional contribution up to the level of the concessional cap may be made in June. This will allow the additional tax deduction to be taken in the year of contribution while the concessional contribution cap will be debited in the following year. This strategy has limited appeal as the next year’s cap will have been used. A contribution within the cap will only be available in that year if it is made in June and allocated in July on an ongoing basis. This strategy is, therefore, generally only useful for members who can use the increased deduction in the current year but are not interested in making a contribution in the next year. This may occur for various reasons including;
- impending retirement
- impending downturn in business fortunes
- an adhoc CGT event in retirement
Be aware that, should this strategy be implemented this year, the amount that may be allocated to the next financial year will be $25,000 so, for a 50 year old, the maximum deduction that may be taken this year is $60,000 not $70,000
Catch up contributions will be available in certain circumstances post 1 July 2018 but, as this item is of no immediate consequence and is opposed by the Opposition in any case, it will be ignored at the moment.
