Superannuation Contributions Caps
Indexing of the superannuation contributions caps will resume from 1 July 2014, resulting in an increase in the contributions caps for the 2014/15 financial year as follows:
| Standard Cap | Aged 50 years or over on 01/07/2014 | |
|---|---|---|
| Concessional Contributions | $30,000 | $35,000 |
| Non-Concessional Contributions | $180,000 | $180,000 |
| CGT Cap Amount | $1,355,000 | $1,355,000 |
From the 1 July 2014 if you are 50 years old or over, you can make additional concessional contributions to your super, with the cap increasing from $30,000 to $35,000. The temporary higher cap is not indexed and will cease when the general concessional contributions cap is indexed to $35,000.
It is important to regularly monitor the contributions made to your superannuation fund/s if you do not want to inadvertently exceed a cap.
Non-concessional Contributions – Bring Forward Rule for Over 65s
A twist on the bring forward provisions for non-concessional contributions is the ability to contribute up to $450,000 to superannuation in a financial year, even if you are over the age of 65.
This is due to the fact that the bring forward provisions can be used, as long as you were aged 64 on the 1st July in the relevant financial year, even if by the time you want to make the contribution you are already aged 65, subject to the conditions below. If you contribute more than $150,000 (being the 2013/14 non-concessional contributions cap) in the financial year you turn 65, you automatically trigger the bring forward rule for the following two years.
However, there are a few other interactions with the superannuation laws that come into play once you are over the age of 65 that you need to be aware of:
- After the age of 65, you need to meet a work test to continue to contribute to super. The work test involves working for at least 40 hours over a 30 day period in the financial year, prior to a contribution being made.
- If you are aged 65 on the 1st July, the “fund capped” amount is limited to the standard annual non-concessional contributions cap (currently $150,000). Therefore, if you have already activated the bring forward provisions in the previous financial year, your superannuation fund can only accept contributions of $150,000 at any one time and you may need to make two separate contributions in order to utilise the remainder of your bring forward cap.
Importantly, once you have triggered the bring forward provisions in a year, any changes to the non-concessional contributions cap for the subsequent two years do not apply to you.
For example, Jim turns 65 on the 30th July 2013 and has not triggered any previous bring forward provisions on his non concessional contributions. He comes into an inheritance of $250,000 on the 1st January 2014.
Jim is able to trigger the bring forward provisions in the 2013/14 financial year as he was only aged 64 on the 1st July 2013, allowing him to contribute his entire $250,000 this financial year, or spaced out over the three year period up to 30 June 2016. He does however need to satisfy the work test to contribute funds to superannuation after his 65th birthday.
Should Jim come into another lump sum of money (say $200,000) that he wants to contribute to superannuation in the 2014/15 financial year, he still has $200,000 up his sleeve that he can contribute over the three year period ending 2015/16. However, as Jim will be aged 65 on the 1st July 2014, he will need to make sure he meets the work test before making the contribution and the “fund capped” amount is limited to $180,000 per contribution for the 2014/15 financial year and Jim will need to make two separate contributions of $180,000 and $20,000.
Changes to Centrelink Deeming Rules
From 1st January 2015, the normal deeming rules will be extended to superannuation account based income streams. This will mean that all financial assets are assessed under the same rules for payments such as the Age Pension, Disability Support Pension and Newstart Allowance. Deeming rules assume your financial assets are earning a certain amount of income regardless of the actual income you earn.
This change will start on 1st January 2015 and account based income streams held by pensioners and allowees prior to 1st January 2015 will continue to be assessed under the existing rules, unless they choose to change products or buy new products from 1st January 2015. Currently, account based income streams have a non-assessable amount (which is essentially a return of capital), reducing the level of income assessable under the Centrelink Income Test.
These changes do not impact on the treatment of superannuation funds held in accumulation phase.
To find out more about the changes to deeming rules and how these changes may impact your financial position, please contact our office to make an appointment to speak with your adviser.
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