The proposed changes to super announced in the 2006/07 Federal Budget will have far-reaching implications for the way Australians save and plan for retirement. Since then, in September 2006, the Federal Government has announced further amendments to the new rules.

There is a window of opportunity to take advantage of the new rules and to find out how major changes to super could affect your plans.

Super changes: what you need to know

One million reasons to act now
Before 30 June 2007 there is a window of opportunity to make an undeducted contribution to super up to $1 million. After 1 July 2007, super fund members under age 65 will be able to make contributions of $150,000 per year or $450,000 in a single year but foregoing the ability to make extra contributions in the following years. While people aged 65 to 74 can make contributions up to $150,000 each year provided they meet a work test.

Tax cuts make super more effective
From 1 July 2007, both lump sum and pension benefits paid to retirees aged 60 and over from taxed super funds will be exempt from tax. Tax will still be payable on benefits paid to someone under age 60, although simpler rules will apply. As a result, super becomes far more attractive for taxpayers.

The above changes make super the most tax effective investment vehicle. However, with new limits on the maximum amount that can be put into super each year, there is a big incentive to make super contributions earlier in life.

For people already retired, a more tax-effective super system means more cash in your pocket to spend on the things you enjoy the most. The good news is it may also mean you won’t have to complete an annual tax return – for couples with an income below $41,360 per year or $24,867 of income from non-super sources for a single person. If you are not yet retired, a more attractive super system means extra incentive to contribute into super in the lead-up to retirement.

New restrictions on tax deductible super contributions
From 1 July 2007, the current age-based deduction limits will be abolished and replaced with a single limit. The first $50,000 pa of employer and personal deductible contributions will be taxed at 15 per cent. Any amount above this will be taxed at the top marginal tax rate. As a transitional arrangement, people aged 50 and over will be able to contribute $100,000 pa on a concessionally taxed basis until 2011/12.

Reasonable Benefit Limits (RBLs) abolished
One of the more significant changes is the abolition of the RBLs from 1 July 2007. There will be no limit on how much may be saved in super. The big winners will be people who have super benefits already nearing or exceeding their RBLs – they won’t have to worry about some of the more complex strategies and inflexible income streams to reduce tax.

How we can help
Over the years there have been many changes to super and these proposed changes are significant and have far-reaching implications. We can help guide you through the changes and help you take advantage of any opportunity that comes your way. We can help you: