In our series of blogs, we will focus on the Superannuation changes and things you need to consider.
In this blog, we will go through options if you have over $1,300,000 in Superannuation and additional funds outside Superannuation to make a contribution.
Currently you are able to make a non-concessional contribution (a contribution you don’t claim a tax deduction for) of $180,000 per year or $540,000 over 3 years to superannuation.
From the 1st July 2017, the amount you are able to contribute will be reduced to $100,000 or $300,000 over 3 years. On top of this, after 1st July, if the amount in superannuation is over $1,600,000 you will no longer be able to contribute to superannuation.
If you currently have funds that could be contributed to Superannuation and your Superannuation balance is $1,000,000 or more you should consider a review of your financial situation.
If we look at Bob, he currently has $1,000,000 in Superannuation and $500,000 in funds outside superannuation.
If Bob contributes to Superannuation, the earnings on this $540,000 will be taxed at 15% (if in accumulation phase or 0% if in pension phase). Outside superannuation, Bob’s marginal tax rate is 49%.
If the earnings on this amount were 5% or 27,000 per year:
- Outside Superannuation, tax would be $13,230 and within Super tax would be $4,050.
- Therefore over 10 years there would be a saving in tax alone of a minimum of $91,800.
- Even with a tax percentage of 34.5% (if you currently earn $80,000) your saving over ten years would be $52,650.
Every situation is different and it is important that you have your personal situation reviewed now to ensure that you are maximising the benefits available.
If any of the above affect you and your need assistance or you have any questions on the changes please feel free to contact Melanie or Renee.
General Advice Warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.
