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super changes

Don’t give up on super just yet

Glenn Fairbairn
Director/Private Client Adviser
28 Feb 2017

Following the Budget in May 2016, superannuation has been in the spotlight.

With a raft of changes proposed and passed through the senate in November last year, many people have been hesitant to contribute too heavily to super in fear that its tax effectiveness has been minimised and that it will be subject to further legislative change in future. 

Among the changes, lowering the non concessional contribution cap to $100,000 from $180,000, lowering the concessional contribution cap from $30,000 to $25,000 and capping tax free earnings within superannuation to superannuation balances of less than $1.6 million, have generated the greatest angst and frustration.

And whilst we agree that constant change reduces confidence in superannuation:

“It is our firm belief that superannuation remains the most tax effective structure to accumulate and preserve assets to provide for your retirement”.

Let’s take retired couple Mr and Mrs Jones.  For them, super will still provide tax free earnings for account balances under $3.2 million. Even for couples with account balances of more than $3.2 million, the worst case scenario is that excessive earnings are taxed at 15%. By structuring assets correctly inside and outside of superannuation Mr and Mrs Jones could potentially have more than $4 million in investment assets without paying tax. And who could argue with that?

If Mr and Mrs Jones were under 65 and a few years away from retirement they could make personal, post tax contributions of $200,000 per annum or bring forward two years of contributions and make a one off contribution of $600,000 every three years.

But what if you’re in the early or middle stages of your career and still building your wealth whilst trying to pay off your hefty mortgage? Given the reduction in contribution caps, you might be questioning how you’ll ever accumulate sufficient assets within superannuation to meet your retirement requirements. The key is to start early. Even if you don’t have a lot of spare cash, it’s well worth siphoning off even a small amount of your salary each pay day into super. You can contribute up to $25,000 of your pre tax salary to superannuation each year and pay only 15% tax. Contributing even a relatively small sum is going help build your superannuation balance over time. Plus you’re reducing your taxable income right now.

As I’ve just illustrated, even with the looming super changes, there remain several opportunities to maximise the benefits available within superannuation. Many of these strategies are complex and I would suggest consulting your adviser to discuss them further.

If you’re not currently a client of Hewison Private Wealth but you’d like to discuss ways to maximise your superannuation, set up a custom SMSF or devise a personalised investment strategy please contact us on info@hewison.com.au or visit www.hewison.com.au and take a look at what we do.

Please note: The information provided above is general information only and individuals should seek specialised advice from a qualified financial adviser. Please contact Hewison Private Wealth for more information.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.