Self managed super funds account for a staggering 29 per cent of the $2 trillion worth of assets in superannuation, according to the ATO. That's over $580 billion.
With so much money tied up in this important nest egg, even the most miniscule change to superannuation law could have long-reaching impacts for your retirement planning. That's why you need to understand exactly what is changing when legislation shifts this spring.
What are the most significant changes?
The most important law changes are as follows:
- The annual concessional contributions cap has been reduced from $30,000 and $35,000 to $25,000.
- The annual non-concessional contributions cap is now $100,000.
- The life time transfer balance for a super pension has been limited to 1.6 million.
- The tax haven for the earnings of transition to retirement pensions is being removed.
Government estimations suggest that four per cent of all super funds will affected by the changes. However, due to their often high asset value and larger contribution size, a far larger proportion of SMSFs will be affected.
Who will this affect?
The ATO lists the average value of SMSFs in Australia at $1,066,080.
The ATO lists the average value of SMSFs in Australia at $1,066,080. This statistic shows that in the near future many SMSFs will be affected by the $1.6 million lifetime cap alone.
The newly lowered concessional and non-concessional limit reductions will effect those wishing to increase their contributions to above $25,000 coming up to retirement.
Also If you're expecting a lump sum of money from an inheritance, a large bonus, or an asset sale then you may not be able to place the entire amount into your super at once.
How can you plan for the new laws?
This might mean without proper planning that a higher proportion of you contributions and savings are taxed at a higher rate.
The new laws could affect self managed super funds and how they must be managed in a myriad of different ways. Australians have an admirable penchant for doing it ourselves, but when it comes to securing your future it's essential that you consult with an expert on superannuation taxation.
The experienced team at Ashfords are well versed in helping people safeguard their well-earned retirement. We can help make sure that your fund is planned and structured in a way that maximises it's worth and improves your financial future.