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Changes to Super for 2018 Financial Year

Superannuation changes took effect on July 1, 2017, with new opportunities for Australians to manage existing funds and build bigger nest eggs. Along with a reduction in the amount of annual non-concessional and concessional contributions each individual can make, there are also new limits on tax-free pension phase superannuation accounts and a lower limit on tax advantaged contributions. While it's too late to make extra contributions, it's important to understand the implications of these changes going forward.

One of the biggest changes to Australian super sees a reduction in the amount of after-tax contributions that each individual can make over a year, from $180,000 to $100,000. People choose to make non-concessional contributions in order to avoid getting taxed at a higher rate, with money only taxed at 15% once it reaches a super fund. This discounted tax rate is lowered to zero when someone enters the pension phase, making it an enticing proposition for thousands of Aussies nearing retirement age. 

Under the new NCC rules, you can only make non-concessional contributions if you have a total superannuation balance of less than $1.6 million. According to Craig Day, executive manager of technical services at Colonial First State, speaking just before the cut-off date, "Currently if you're under 65 your cap is $180,000 per year and you can bring forward up to two years worth of contributions to contribute up to $540,000... As of the first of July, that cap is reducing down to $100,000 a year, we still get the three-year bring-forward, so that means for people under 65 they will be able to now contribute only up to $300,000."

Along with changes to after-tax contributions, before-tax contributions have also been reduced from $30,000 to $25,000 per year, with the over-50s rate dropping from $35,000 to $25,000. "We're seeing a reduction in the concessional cap back from a maximum of $35,000 back to $25,000." said Mr Day, adding "[So if you are currently salary sacrificing] what you would want to do is review that very early in the [new] financial year and actually then reduce the amount so, if you're salary sacrificing over and above, then request that your employer reduce the level of salary sacrifice down to a maximum of $25,000."

Another key change sees an expansion of tax-deductible contributions for Australians, with all individuals under the age of 75 now permitted to claim tax deductions for personal super contributions. There is also a $1.6 million cap on tax-free pension phase superannuation accounts, with large account holders having the option of removing funds from the pension system or rolling accounts back to the accumulation phase which is taxed at 15%. The cap applies to existing and future retirees, with the cap indexed in $100,000 increments in line with increases in the consumer price index. One other change sees an increase in the income threshold for the spouse superannuation tax offset, which is increasing from $10,800 to $37,000 before phasing out at $40,000.  


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