Some great news for Australians is that the amount we are allowed to stick into super is about to rise. I was quoted in this article by ‘Wealth Professional’ about the changes but felt the need to expand on what exactly is is happening and the impact it will potentially have.
A couple of days ago I was on the Australian Tax Office (ATO) website and noticed that they had adjusted their tables on contribution caps. This change should really have occurred two years ago as the caps are meant to be indexed to AWOTE, however the then Labor government froze the indexation till 2014-15. With the ATO now publishing the increased limit, we can be fairly certain that they are a reality. In fact the only thing that could stop it is if the Liberal government froze the indexation again, and I see that as very unlikely.
There are two main reasons why this increase is so welcome. The first is that anyone under the age of 50 who wants to contribute more into super, say by salary sacrifice, can now do so. The second reason, is that the non-concessional cap is calculated by multiplying the concessional cap by six. Hence, the increase of concessional cap to $30,000 has caused the non-concessional cap to increase from $150,000 p/a to $180,000.
The increase from $150,000 to $180,000 will greatly benefit people approaching retirement who often struggle to get their assets into the super environment. It is common for me to recommend the ‘bring-forward’ rule which allows a person to effectively contribute 3 years’ worth of contributions in the one year. As of 1 July 2014, instead of a maximum $450,000 contribution people will now be able to contribute $540,000; a significant difference.
This is good news for all those striving for a more secure retirement.
If you would like to discuss your retirement planning, please feel free to get in touch.