Make the most of the new, flexible super rules
THERE is a lot of press at the moment around what you can't do with your superannuation following the rule changes which come into effect from July 1.
These include reduced concessional (pre-tax) and non-concessional (after-tax) contributions caps and a $1.6 million limit on pension accounts. For younger working Australians these changes will have little impact on their financial planning, because few are able to take full advantage of these limits.
However, what has not been discussed as widely and what is potentially far more valuable to most people is what you can do after July 1, which you can't now.
Currently, employed people who earn more than 10% of their income from their employment are unable to make personal contributions to their super and claim a tax deduction, the way self-employed people can. They are restricted to salary sacrificing via their employer or making after-tax contributions. From July 1, this restriction is removed which will allow employees to add to their employer's super guarantee contributions by making personal contributions direct to their super account and claim a tax deduction at the end of the year.
Further, from July 1, 2018, you can carry forward the unused portion of your concessional contributions cap for up to five years. For instance, if you make concessional contributions of $20,000 a year and in 2022/2023 start a business selling flowers at the farmers' market on the weekends, you could make an additional personal contribution of up to $20,000 and claim a tax deduction.
These changes recognise that working Australians often derive their income from multiple sources and that it varies as they go through different stages of life and build their careers. Thus providing much-needed flexibility.
Putting a long-term financial plan in place to save for your retirement and take advantage of superannuation tax concessions could be one of the most valuable financial decisions you make. As always, seek the advice of a qualified financial planning professional to navigate the technicalities and design a plan tailored to your personal situation.
Campbell Korff (Campbell.Korff@ybr.com.au) is branch principal and wealth manager at Yellow Brick Road's Lismore and Ballina offices. This information is general in nature and readers should seek professional advice specific to their circumstances.