Concessional contributions cap update
The concessional contributions caps have increased from 1 July 2014 and this may allow you the opportunity to further boost your super. The standard concessional contributions cap has increased from $25,000 to $30,000. However, if you are aged 50 or more at any time during 2014/15 financial year, you can use the higher cap of $35,000.
The concessional contribution caps include employer contributions such as the super guarantee, voluntary employer contributions, salary sacrifice contributions and personal deductible contributions (where eligible). Accordingly, the following opportunities arise for 2014/15:
- Salary sacrifice – contribute pre-tax money into super and save tax.
- Personal deductible contributions – if you are self-employed, retired or not working (and eligible to contribute), you may be able to claim a tax deduction on personal super contributions to reduce income tax or capital gains tax on shares or property.
- Start a transition to retirement (TTR) pension – you may benefit from a TTR pension and salary sacrifice income to build retirement benefits.
As there are tax penalties if you exceed the concessional contributions cap, it is important to seek advice. Your financial adviser can identify contribution strategies to help you to build your super and take advantage of the increased caps.
Insurance through super
From 1 July 2014, super funds can only provide new insurance cover to members where the insured event is consistent with a condition of release. This means that any cover held through super (for example total and permanent disablement and income protection) must be able to be received by you in the event of claim. Under arrangements in place before 1 July 2014, it is possible that certain cover may be paid into the super fund, but cannot be accessed from the fund.
Most retail super funds will have updated the insurance policies in their product offering so that all types of cover can be accessed in the event of claim. These changes apply to all new cover provided to new and existing members from 1 July 2014. Existing cover held through super before 1 July 2014 is not affected by these changes. In these cases, members can continue to be covered and can claim under the previous policy terms. Increases to existing cover held as at 30 June 2014 are also not impacted by these changes.
If you do not have sufficient insurance cover, or if you have insurance cover but want to review how the changes may impact you, speak to your financial adviser.
Further changes from 1 July 2014
There are many other changes from 1 July 2014 that may impact your financial plan. A brief summary is provided below:
- A temporary budget repair levy of 2% applies on income above $180,000 for 3 years.
- The Medicare levy has increased to 2% and is likely to impact your cashflow.
- Super guarantee has increased to 9.5%. If you are an employee, you should receive greater employer contributions. If you are an employer, you must ensure you satisfy your super guarantee obligations.
- There are changes for new entrants into aged care from 1 July 2014. If you or someone you care about is considering moving to an aged care facility, it may be time to consider and review the aged care options available with your financial adviser.
The changes highlight the importance of receiving regular financial advice.RI Advice Group Pty Limited ABN 23 001 774 125, AFSL 238429. This information does not consider your personal circumstances and is general advice only. You should not act on any information without obtaining professional financial advice specific to your circumstances. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information please contact our office to opt out.