Following the recent amendments to superannuation the Government has introduced a process by which superannuation fund members with balances below $500,000 at the beginning of the year are able to contribute Catch Up Concessional Contributions.
From 1 July 2017 the annual Concessional Contributions Cap will be reduced to $25,000 for all Australians from the current cap of $30,000 for under-50s, and $35,000 for over-50s.
The new Concessional Contribution rules are as follows:
- From 1 July 2017, the annual concessional cap will drop to $25,000 for all superannuation fund members.
- From 1 July 2018, a superannuation fund member can start to carry forward unused Concessional Contribution Cap amounts from prior years.
- From 1 July 2019, a superannuation fund member can make Catch Up Concessional Contributions using the unused portion of the annual concession caps from the previous 5 years provided that the superannuation fund member has a total superannuation balance of less than $500,000 in super, just before the start of the financial year.
- Note that superannuation fund members can only start carrying forward unused cap amounts from 1 July 2018. That is, from the start of the 2018/2019 financial year, which means the 2019/2020 financial year is the first year that superannuation fund members can take advantage of the unused cap amounts from previous financial years.
- Unused Concessional Contribution Cap amounts not utilised after five years can no longer be carried forward, so you lose the opportunity to take advantage of the unused portions for those previous years going back further than five years.
These new rules provide some substantial income tax benefits to superannuation fund members with balances below $500,000 and provide strong tax planning as well as retirement planning opportunities that should be investigated.
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