Flexible super rules to help workers and families build bigger nest eggs
CHANGES to superannuation rules next month are set to deliver workers and families some flexibility that has been missing in retirement saving.
While lower contribution limits and balance caps for wealthy super fund members have dominated the super spotlight, other new initiatives make it easier to grow a nest egg.
From July 1, anyone can make tax-deductible contributions to super at any time, with a $25,000 annual limit, rather than set up salary sacrifice in advance through their employer.
Beyond Bank Wealth Management national manager Adrian de Silva said this flexibility was previously limited to self-employed people.
“Anyone under 65 — or up to 75 if they meet the work test — will be able to make a tax-deductible contribution,” he said.
“This will mean they can contribute extra money at any time before the end of a tax year and potentially save tax. It will also give people greater options to hold insurance cover in super.”
Tax deductible super contributions — known as concessional contributions — are taxed at 15 per cent as they enter your fund, which is lower than most marginal tax rates of up to 47 per cent.
Health coach and personal trainer Melanie Hansen, pictured, welcomed the increased super flexibility.
“Anything that can potentially help workers and families has to be a good thing,” she said.
“Allowing for tax deductions will encourage more people to invest in their super.”
Another positive July 1 change is the broadening of the spouse tax offset, which effectively gives people up to $540 if they put money into their low-income spouse’s super.
Previously spouses could only earn below $13,800 but this trebles to $40,000 next month.
The spouse offset has rarely been used by super savers and Perpetual Private’s manager of strategic advice, Catherine Chivers, said for many it was “off the radar”.
“I think for a lot of people it was seen as being a little too hard, and something they couldn’t be bothered with. Hopefully that will change,” she said.
More flexibility comes in 2018 when the government will allow people to play catch-up with their tax-deductible contributions, using up to five years of previously unused caps.
Ms Chivers said this gave people the potential to pump in $125,000 of tax-deductible contributions in one hit, but noted it was only available for those with super balances below $500,000.
“With every reform comes opportunity. It’s a matter of being able to look hard enough to find them,” she said.