Superannuants and their advisers should review their retirement savings strategy in light of the new rules now in play at the start of the 2020 financial year, a mid-tier accounting firm director has suggested.
HLB Mann Judd Sydney superannuation director Andrew Yee identified the ability to carry forward the unused component of an individual’s concessional contributions cap for the first time as one new law people should consider implementing.
“From 1 July 2018, taxpayers can roll forward any unused concessional contributions cap for five years, after which they expire. If they don’t use the full amount of the $25,000 concessional contributions cap in 2018/19, they can carry forward the unused amount and take advantage of it up to five years later, provided their total super balance is less than $500,000 on 30 June of the previous financial year,” Yee noted.
“The first financial year where you can access unused concessional contributions is from now, the 2019/20 financial year. Such a change requires additional monitoring of super contributions and may add to administration costs.”
With regard to more recent legislation, he pointed out with effect from 1 July people aged between 65 and 74 can make voluntary superannuation contributions for a year from the end of the financial year in which they last satisfied the work test if their total super balance is under $300,000. This will enable them to make one last contribution before retirement.
Yee emphasised the principle of getting as much money into the tax-effective superannuation environment still stands.
“The focus historically has to be put as much into super as you can and then be in a position to draw down on the nest egg in retirement. This is still the case – contribute as much as you can afford to, using salary sacrifice and personal concessional contributions,” he said.
“However, taxpayers need to be fully aware of how much they can contribute, the amount one can have in pension phase and any super balance caps which may impact on their retirement savings.”
According to Yee, being aware of the changes introduced from 1 July this year reinforces the notion that superannuation is not a set-and-forget exercise.
“Depending on their stage of life, the level of importance may be different, but nevertheless, attention to super needs to be had, even in the early accumulator stage,” he said.
“Too many people still adopt a set-and-forget approach, especially younger people just starting out in their careers, as retirement for them is a long way off and it’s not money they can readily access. There absolutely needs to be a shift in attitude otherwise they’re unknowingly missing out on potentially thousands of dollars come retirement.”