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Changes to concessional contributions (effective 1 July 2017)

The 2016-17 Budget announced several changes in regards to concessional contributions. Even though they do not come into effect until 1 July 2017, their effect should be considered pre-30 June 2017.

What are concessional contributions?

 Concessional (pre-tax) contributions to your super include:

– employer contributions

– any amount you salary sacrifice into super

– personal contributions you claim as a personal super contribution deduction

What are the changes?

Maximum earnings condition

From 1 July 2017, the 10% ‘maximum earnings’ condition for personal super contributions deductions no longer applies.

 Concessional contributions cap reduced to $25,000

From 1 July 2017, the concessional contributions cap is $25,000 for everyone. Previously, it was $35,000 for people 49 years and older at the end of the previous financial year and $30,000 for everyone else. The new cap will be indexed in line with average weekly ordinary time earnings (AWOTE), rounded down to the nearest $2,500.

This means that 2017 is the last year when you can contribute up to $35,000 into your fund before tax (depending on your age).

Carrying forward unused concessional contributions

From 1 July 2018, you will be able to ‘carry-forward’ any unused concessional contributions cap. You will be able to access your unused concessional contributions cap on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire.

The first financial year in which you can access unused concessional contributions is 2019–20.

You will only be able to carry-forward your unused concessional contributions cap if your total superannuation balance at the end of 30 June of the previous financial year is less than $500,000.

What does this mean for you?

Year ended 30 June 2017

Check how much you (your employer) contributed to date. This includes contributions into all your superfunds. Then you can estimate how much you can contribute before 30 June 2017 to get you to current cap.

Note that the contributions MUST BE RECEIVED by the fund before 30 June 2017 to be allocated to that year caps.

Year ended 30 June 2018

Ensure your concessional contributions do not exceed new cap of $25,000.

You may need to review your salary sacrifice arrangements.

Year ended 30 June 2019

If you super balance is under $500,000 and you do not use your concessional cap (i.e. contribute less than $25,000 in the year), you will be able to carry forward the unused cap to the next financial year.

In the following year, you will get the benefit of concessional cap as well as unused carried forward cap from prior year.

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