Listen up! The word on the street is that big changes to superannuation might be introduced on budget night May 3rd. If made they will come into effect as soon as the announcement is made, leaving no time to react to the changes. We’ve got the low down on what’s expected and how it might impact you.
1. Reduction to the Concessional Contribution amount
This may not be good news. The concessional contributions cover all of the money you put into your super before income tax is taken out. This includes both the money you might be salary sacrificing to top up your super fund as well as your employers 9.5% contribution. You are currently allowed to contribute up to $30,000 P/A, which are taxed in hands of your superfund at 15%. It is expected that it can decrease significantly to $20,000. For over 50s the current amount is $35,000 and this is also rumoured to reduce.
How can you beat the taxman?
By bringing forward any contributions you were planning to make before June 30th, to be made prior to budget night, you can still get the full tax-saving benefit for this financial year.
2. Removal of the Transition to Retirement Scheme
This is a big deal for those who meet the age requirement and have not yet signed up to the scheme. It is likely this plan will be scrapped, as it has not performed as the government had projected. The initiative was introduced to encourage people over 57 years prior to April 1st 2016, to reduce their work hours without effecting their take-home pay. They are able to do this by supplementing their income from their superannuation. (For those born between July 1st 1960 and June 30th 1961, the eligibility age is 56.)
Another bonus is that your accumulation balance is moved into a pension account, no tax is charged on earnings from that pension account. If you leave this money in your accumulation account you will be charged 15% on investment earnings.
How can you get ahead?
By signing up to the scheme prior to the budget night, you can take advantage of the taxation savings and be eligible to reduce your working hours without effecting your take-home pay when you are ready to do so.
3. Removal or alterations to the Re-Contribution Strategy
This strategy is a popular one for parents, who are thinking ahead. The strategy is designed for people who is able to put some of their take-home pay into their super. Because this payment is made post-income tax, it is called a ‘Non-Concessional Contribution’ and attracts no further tax. There are multiple benefits including being able to grow your super balance faster, but the one parents appreciate most is that when they pass-away, their children can inherit the non-concessional portion of their superannuation tax-free. This will make a big difference into their final inheritance amount.
How can you beat the system?
By contributing post-tax income before the budget changes are potentially announced, you can save your children paying tax on that amount down the track. This area of tax is quite complex, so we advise coming and seeing us to make sure your circumstances allow you to use variations of the re-contribution strategy
Whilst its is not guaranteed these changes will be made, the economy and financial rumour mill is running rife that they are likely. It is really important you seek advice as soon as possible, rather than waiting until the usual end-of-financial year visit. Making these suggested pre-emptive actions will make sure you are ahead of the game. The best bit is if these changes aren’t announced, then you won’t be any worse off, in fact you will be more organised and less stressed come June 30th.
Book an appointment now on 5911 7000.
As the holiday season approaches, it's crucial to consider how your spending habits may influence especially when it comes to utilising easy credit options.
A budgeting app is an app designed to help you optimise the spending and savings choices you make each month.
We'll dive into some of the everyday mistakes and tricky grouping issues that small businesses often encounter when dealing with payroll tax.