From 1 July 2014 there will be a concessional contribution increase for people over the age of 49 (on 30 June 2014) from $25,000 to $35,000. (The restriction regarding the ability to contribute after age 65 still applies.)
For people under the age of 49 the concessional cap will be $30,000.
|On 30 June 2014
|Age 49 to 59
Non concessional contributions
Non concessional contributions from 1 July 2014 will increase to $180,000 and the bring forward rule will increase to $540,000 (3 x $180,000). A very important matter to understand is that if a person uses the bring forward rule prior to 1 July 2014, the total amount allowed within the 3 years will stay at the level of $450,000 and will not go up.
As an example, Steve contributed $225,000 as non concessional in the financial year 2012-13 which triggered the bring forward rule. This means that Steve can contribute up to $225,000 as non concessional up to the end of the financial year 2014-15 (the balance of the bring forward of $450,000) and cannot use the new threshold amount.
If you can use the bring forward rule it’s important to note that you have to be aged 64 or under on 1 July 2014 to use that rule for the 2014-15 financial year.
The Government co-contribution will be available through the financial year 2014-15 on the basis of 50c per dollar for non concessional contribution up to the maximum of $500. The co-contribution will be reduced by 3 cents for every dollar of income exceeding $33,516.
Insurance held inside super
From 1 July 2014 a new SIS regulation comes into effect to prohibit a trustee of a regulated super fund from providing an ‘insured benefit’ in relation to a member unless the insured event is consistent with one of the following conditions of release:
- death (including terminal medical condition)
- permanent incapacity
- temporary incapacity.
An ‘insured benefit’ in relation to a member is defined to mean a right2 for the member’s benefits to be increased on the realisation of a risk.
In relation to this rule, the Government has confirmed that the policy definitions do not need to adopt the SIS Regulation definitions but they must be consistent with those definitions and that the insured benefits must be able to be released to members by the superannuation trustee.
Therefore, from 1 July 2014, a trustee of an SMSF will not generally be permitted to acquire a trauma or an ‘own occupation’ TPD policy in respect of a member as the terms and conditions of these policies do not align with any of the specified conditions of release. Trustees should also take care when acquiring income protection policies to ensure that they do not include any ancillary lump sum benefits, such as crisis or rehabilitation benefits, which do not align with one of the specified conditions of release.
However, it is important to note that existing policies taken out in respect of a member prior to 1 July 2014 will be exempt from the changes. Therefore, trustees will be able to continue to hold trauma and own occupation TPD policies where the policy was in place before that date.
A trustee could therefore consider obtaining one of these types of policies prior to 1 July where this is appropriate. In this situation, the member should be aware that the proceeds would still be subject to preservation meaning that they would not be available until a condition of release is satisfied, such as permanent incapacity or retirement.
Employer super guarantee contribution
The rate of employer super guarantee from rise from 9.25% to 9.5%.
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Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.