How much can I contribute to Super this year?

Concessional (Tax Deductible)

If you are under 49 on the 30th June 2016 the maximum you can contribute to Super is $30,000

If you are 49 or over on the 30th June 2016 you can contribute $35,000 to Super

NOTE: This is the last year you can put this amount into Super. From 1 July 2017 everyone will be limited to $25,000 per year. 

Non-Concessional (Not Tax Deductible)

This is where things are going to get really tricky. 

Previously you could contribute $180,000 to Super each year or if you were under 65 you could 'bring-forward' years and contribute up to $540,000. 

If the changes in the budget are passed you will have a LIFETIME limit of $500,000. This will be backdated to the 1st July 2007. For a lot of people this means you will have already reached this limit. Don't stress if you have already put more than this in, you are safe and won't be required to take the money or repay it. 

Who this affects?

We often get asked why you would want to contribute your personal money into Super?

Let's say you now have $700,000 in your SMSF. When you pay a pension from a SMSF the earnings on the $700,000 are tax-free. If you had this money in your own name you would have to declare the earnings in your personal income tax return and pay tax on that money at your personal tax rate. None of us like paying unnecessary tax!

Assume your investments are on fire (technical speak for doing well) and you are earning 10% return (ie $70,000). Tax on this at your personal marginal tax rate would be $15,697. Having this money inside your SMSF means you save yourself $15,697 in one year alone!!!!!

So gone are the good old days of being able to reduce your tax by contributing your pension (and savings) back into Super each year. Once you have reached your $500,000 'lifetime limit' the money will need to stay outside super. Remember this limit is per person, so for a couple is $1,000,000.

I'm taking a pension. How much do I need to take this year?

Once you start paying a pension from your SMSF there are certain conditions that must be met. Everyone has a minimum pension they must take (and in some cases a maximum) as well as more lovely paperwork to complete!

The minimum pension ranges from 4% to 14% depending on your age. Don't stress about the exact amount. Our job includes calculating this Minimum late May each year to ensure everything is spot on. 
What's this 4% to 14% you talk about?

Let's assume you have the same $700,000 as in the above example (this is the value of all the assets in your SMSF as at the 30th June). If your minimum pension was 4% you would need to pay yourself $28,000 as a Pension for the year. You can choose to take this Pension during the year (ie as monthly payments) or one lump sum. 

Some of you (usually those of you still working) also have a maximum pension. This is 10% of your pension balance at the start of the year. Penalties for overdrawing your pension can be severe.  Don't worry, we also keep an eye on this for you throughout the year as well. 

I'm retired. What can I get from the Government?

There have been a lot of changes to Centrelink Aged Pensions over the last few years. 

Currently a couple can have $1,170,000 in assets (excluding your family home) before you lose your pension. So if you are over 65 and your assets are less than this, you can qualify for an aged pension. If you are single the amount is $788,250. If you don't own a home this amount is $1,319,000 for couples and $937,250 for single. Remember this is not just the actual pension payments but also your health care card. 

But what's the catch?

These amounts change as at the 1st January 2017. 

The $1,170,000 test for couples will be reducing to $823,000, and for singles will reduce to $547,000. For a lot of people this means your pension will cease, but you may still have access to your health care card. 

What can I do?

Unfortunately the only thing you can do it spend! Perhaps it's time to take that overseas holiday! 

You can't give away your assets (ie your money) to your kids as anything over $30,000 will be assessed to you as still being your asset for a period of 5 years. 

As always we are not telling you to go and spend your money without consideration of whether you have enough to live off in retirement etc, but if you are really close to these limits you should certainly sit down with your advisor and work on a plan. 

What's the other catch?

Even if your assets are under these levels you still need to pass the 'income test' in order to qualify for an actual pension. 

If you earn more than $1,909.80 as a single person per fortnight or $2,922.80 for a couple you will not be entitled to a pension. This is income from all sources including super. 

Notes

There are a lot of additional changes that are earmarked to start on the 1st July 2017. For a breakdown check out our Budget Wrap Up.

If you want stress-free retirement planning and don't currently have someone helping you, let's talk.