Changes to Concessional Contributions

Whether you are just entering the workforce or nearing retirement, superannuation is important to most of us.  Essentially it is putting money aside to use during retirement and could impact greatly on your lifestyle when you are able to access your super.  One way to put money into super is through concessional contributions –  this being an area where the government have made a number of changes that apply from 1^st July 17.  Concessional contributions are before tax contributions, which either you as an individual or your employer receives a tax deduction for.  These contributions include the 9.5% super guarantee or salary sacrifice arrangement paid through your employer, as well as any personal contributions that an individual claims a tax deduction for on their return.

Until the 30^th June 2017 the annual caps on these contributions are $35,000 for those aged 49 or over, or $30,000 if under 49. From the 1^st July 2017 this cap will be a flat $25,000 regardless of age.  As a result of these changes any existing salary sacrifice arrangements should be reviewed.  As of 1^st July 2017 any unused concessional contributions will be carried forward on a 5 year rolling basis.  This could be particularly useful depending on the circumstances of the individual.

Another area of change is whether it is possible for an individual claim a tax deduction for super contributions that they have made.  Under the current rules, this is only possible if they were substantially self employed, being that less than 10% of their assessable income was derived from employment income.  From 1^st July 2017 the 10% rule no longer applies, so that anyone who is eligible (those aged between 65 to 74 will still be required to meet the work test) can claim a tax deduction for their own super contributions through their personal tax return.

At present high income earners who earn greater than $300,000 (including low tax contributions) pay an additional 15% on their concessional contributions. From 1^st July 2017 the threshold reduces to $250,000.

Contributed by Campbell Liggins.