All is not lost when it comes to building superannuation as a tax-effective nest egg…but it does require a plan, stepped out over a number of years into the future if the objective is to maximise an after-tax retirement income stream.
Over the past 12 years, the ability to funnel personal wealth into superannuation has, bit by bit, become more limited with the introduction of the Transfer Balance Cap last year now restricting the contribution of after-tax monies (for which no tax deduction is claimed) to only those members with balances less than $1.6 million.
The non-concessional contribution limit is now $100,000 per member per annum where their superannuation balance as at 30 June 2017 was less than $1.6 million. The three-year bring-forward concession still applies, which means that up to $300,000 can be contributed this year (subject to the size of contributions made in the 2016 and 2017 years), but no further non-concessional contributions can be made in the next two financial years.
What it means for you: employer contributions only go so far, so non-concessional contributions are your greatest strategic opportunity to increase the amount of your capital accumulated in what is generally the most tax-effective vehicle. However, due to tight annual limits, a sufficient retirement pool can only be built if contributions are made over multiple years well ahead of 65 years of age, where financial resources allow.
Hazards to avoid:
Non-concessional contributions are still subject to the ‘work test’ beyond age 65 years, meaning members must be gainfully employed for at least 40 hours in a period of 30 consecutive days.
For those members with balances near $1.6 million, this three-year bring-forward cap is reduced to ensure this year’s contribution does not send them too far above the Transfer Balance Cap: