Concessional Contributions & Changes to Super ... What You Should Know

by Dominique Schuh

Tumbling commodity prices on rapidly fading global reflation hopes dragged the Australian share market lower again this week but bargain hunting in the major miners and telcos helped trim losses. Following a 0.3 per cent loss on the US S&P 500 index, the S&P/ASX 200 index opened almost one per cent down, before bouncing to 0.2 per cent loss as a rally in iron ore futures boosted miners. Selling returned and it held above the psychological 5800 point level to close down 32.7 points, or 0.56 per cent, at 5804 on volume 17 per cent above average. The Australian dollar dropped US0.6¢ to US75.20¢ despite broad US dollar weakness as the deteriorating commodity outlook weighed on the Aussie. Currency market volatility spiked and the British pound leapt 2.2 per cent against the greenback and 3.2 per cent against the Aussie after the surprise announcement by British Prime Theresa May of a snap June 8 poll to secure a strong mandate for Brexit negotiations.

What this means for you:
The thing still dominating our immediate world at the moment are the superannuation changes coming into effect on July 1. From 1 July 2017, the general concessional contributions cap will be lowered to $25,000 (2017/2018 year) from $30,000 (2016/2017 year), and the over-50s cap of $35,000 (2016/2017 year) will be dead from 1 July 2017. So if you are making general concessional contributions you only have a little over two months to take advantage of the higher caps.

The one upside to the cut in the annual concessional (before-tax) contributions cap, is that the government has introduced catch-up concessional contributions. The catch-up contributions opportunity was initially planned from 1 July 2017, but the measure has now been delayed. Instead, the start date for the catch-up provisions is 1 July 2018. What this new measure means is that unused portions of the concessional cap each year can be carried forward on a rolling basis for up to 5 years, for the annual caps applicable from July 2018, but only if you have an account balance of less than $500,000. If you would like to find out more about concessional contributions and the changes to superannuation, give us a call.