There has been much chatter in the media about the possibility that Treasurer Scott Morrison may reduce the maximum contribution limits that individuals can make into their superannuation fund (either on a tax deductible or after tax basis).
While clearly we have no inside knowledge of what is going on in Canberra in the lead up to the Budget which has been bought forward by a week to Tuesday 3rd May 2016, there has been sufficient noise about changes to the superannuation system for us to believe that we are being prepared for changes.
It is with this in mind that we are flagging to investors that if you are intending to make a superannuation contribution this financial year under the existing rules that allow a deductible contribution up to $35,000 for those over age 50 ($30,000 for those under 50), or an after tax contribution of $180,000, then you may wish to do so before the Federal Budget.
We remind investors that the main reason behind investing in the superannuation system is to obtain a tax advantage, therefore before making any contribution we recommend investors seek advice to determine that they will be gaining an advantage by contributing into superannuation. For instance retirees over age 65 have an effective tax free threshold for income of around $30,000 each ($60,000 per couple) courtesy of the tax free threshold of $18,200 that applies to everyone, plus the seniors rebate. Therefore some retirees may obtain no benefit what so ever from contributing into superannuation. Low income earners are another group that may not benefit from contributing into superannuation.
Below is a table summarising the contribution rules that apply to determine whether individuals are eligible to contribute into superannuation in the first place.
The bottom line on the balance of probabilities is that it is reasonable to expect changes to superannuation in the May Budget and we are simply putting a message out there that if you were going to contribute to superannuation before the end of the financial year, it may pay to do this before May 3rd.
It sure will be an interesting Federal Budget and we will have full coverage on it after budget night.