One of the sleeper issues in the new superannuation legislation that was passed by the government last week is the potential impact on high income earners with significant investments.
Under the current rules, you are able to make after tax contributions to super of $180,000 p.a. and you also have the opportunity to make three year’s contributions in one go (if for instance you receive an inheritance of sell an asset and wish to contribute these monies to super).
From 1 July next year, these contribution limits will reduce to $100,000 p.a. and $300,000 over three years.
Pretty simple so far.
The sleeper issue though is that provided you adhere to these limits, you are able to continue making these contributions through till age 65, or later if you continue working. From next July however, once you have accumulated $1.6 Million in the superannuation environment you will no longer be able to make these contributions. Any amounts already in there can remain within the environment though.
For many high income earners, super has long been one of the most tax effective places to invest their surplus funds. That is because earnings are only taxed at 15% (or 10% for eligible capital gains), rather than their top marginal tax rate of 47%.
You may therefore wish to review your investment structure prior to next June to see if you can take advantage of this window while it remains open. For every $100,000 invested this way you could save up to $1,280 p.a. in tax on your investment earnings.
If you have any questions in relation to this, please contact me.
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Taxation, legal and other matters referred to on this website are of a general nature only and are based on Consultum’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.