New super laws set to take effect
AUSTRALIANS have just a few months to add a bit extra to their super before tight new contribution limits take effect from July 1.
At present, before-tax super contributions are restricted to a maximum of $30,000 annually (or $35,000 per year if you're aged 50 or over before July 1, 2017).
From July 1, however, the annual limit will be cut to $25,000 regardless of age.
If you work as an employee, the bulk of your before-tax super contributions probably come from the bosses' compulsory contributions. But you could also be making salary sacrifice super contributions, where part of your pre-tax wage is paid into super rather than receiving it as cash in hand.
If that sounds like you, bear in mind that both your bosses' contributions and your own salary sacrifice contributions count towards the single upper limit.
Do check that you won't exceed the new threshold of $25,000 that applies from July 1. This is especially important if you're due for a pay rise in the new financial year as this will push up your employer's contributions.
The amount you can add to super from your own wallet - known as after-tax contributions, is also tightening on July 1.
Currently, these contributions are limited to $180,000 per year. Or, if you're aged under 65, you can use the "bring forward” rule to contribute as much as $540,000 in a single year providing you make no further after-tax contributions for the following two financial years.
From July 1, the limit on after-tax contributions will drop to $100,000 annually - a solid cut of $80,000. You'll still be able to bring forward three years' worth of contributions in a single year but this will be limited to $300,000 in one year.
These are significant cuts to after-tax super contributions, and if you have spare cash through, say, the sale of an investment property, it could be worth taking advantage of the current higher contribution limits to grow your super.
Adding money to your super savings means having more to live on in retirement, and that's important.
But keep an eye on how much you're tipping into super - especially after July 1.
Going over the annual thresholds will mean facing additional tax and penalties on your super contributions.