Find out how increased super contributions, as well as other changes, could affect you and your employer in the year to come.
Several crucial changes to Australians’ superannuation came into effect from the 1st of July last year. Those who made extra super contributions, couples whose combined income was less than $40,000 and those with an income close to or exceeding $250,000 were among those who are expected to be affected. But as 2018 begins, it is time to focus on the latest set of scheduled changes to superannuation. A thorough understanding of these changes, and how they will affect you, will assist you in making informed decisions for the balance of the 2017/2018 financial year, and beyond.
The rising Maximum Super Contribution Base, and further changes.
The Australian Tax Office (ATO) has released the key facts and figures regarding superannuation rates and thresholds for the 2017/2018 financial year. For 2017/2018, the Super Guarantee (SG) rate is 9.5%, the same as it was in 2016/2017. The SG rate is not due to increase until July 2021, when it is expected to rise to 10%. While the SG rate will not be increasing in the immediate future, the maximum super contribution base (MSCB) for 2017/2018 will be is increasing. The MSCB will be rising to $52,760 per quarter (an approximate 2.21% increase on the 2016/2017 MSCB ). The maximum SG obligation for your employer will be $5,012.20 per quarter (being 9.5% of $52,760), or $20,048.80 per year.
Whilst the maximum super co-contribution entitlement remains unchanged at $500, the eligibility income thresholds are set to increase. The lowest income threshold for full entitlement will be $36,813 (an approximate 2.20% increase on the 2016/2017 threshold) and the highest income threshold will be $51,813 (an approximate 1.55% increase on the 2016/2017 threshold).
Other changes include the low rate cap amount for super lump sum payments will increase to $200,000, and the super Capital Gains Tax (CGT) cap increases to $1,445,000 (this cap applies where you make a personal super contribution using the capital proceeds of the sale of certain small business assets.
In addition to these changes, the First Home Buyer Super Saver Scheme (FHSSS) has passed through Parliament. From the 1st of July 2018, the scheme means that first home buyers can use their superannuation savings for a house deposit. From the 1st of July 2017, the FHSSS will apply to personal super contributions of up to $15,000 per year above your compulsory contributions, up to $30,000 in total. Then, according to the FHSSS, these entry-level buyers can access these contributions, along with deemed earnings, and use them to acquire property.
Commentary on the implications of FHSSS
What do industry experts have to say about these upcoming changes? Treasurer Scott Morrison said, of FHSSS, that the majority of first-home buyers that use the scheme would be able to accelerate their savings by at least 30%. Michael Sukkar, Assistant Minister to the Treasurer, said that FHSSS would also “allow older Australians to contribute the proceeds of the sale of their family home to superannuation, better target deductions relating to residential investment properties and boost the availability of rental accommodation in the market”. However, the exact number of people who will take advantage of FHSSS will not become clear until the scheme itself begins to gather momentum. Dr. Martin Fahy, the chief executive of the Association of Superannuation Funds of Australia (ASFA), speculated that it may take time before the FHSSS becomes widely known.
How Does This Affect You?
Your superannuation is your future, so being aware of how these recent changes affect you will assist in planning for a comfortable one. Seeking guidance from a professional financial planner is always advisable before making any decisions regarding your superannuation or savings.
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This document contains general information only and has been prepared without taking into account your financial objectives, situation or needs. It may, therefore, not be right for you. Before you make any investment decision, we suggest you consult Nationwide Super’s Product Disclosure Statement available at nationwidesuper.com.au/PDS and/or seek licensed financial advice. As at the time of compilation, the information contained in this document is correct and any estimates, opinions, conclusions or recommendations are reasonably held or made. Subsequent events may mean that the information becomes out-of- date and so, to the maximum extent permitted by law, we disclaim all liability and responsibility for any direct or indirect loss or damage which may be suffered by any recipient through relying on anything contained in or omitted from this document.
Nationwide Super looks after the superannuation needs of people who work in and run small businesses right around Australia. They’re a multi-industry superannuation fund that has been serving the Australian community since 1987, offering competitive products and highly-regarded personalised service. As a member-based business, their focus is not on generating profits for shareholders – but to return benefits to members for their retirement.