New super thresholds add extra $60k bang

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An extra $60,000 in non-concessional contributions can be made if advisers and their clients wait until the 2014/15 year to trigger the ‘bring forward’ rule, following an ATO announcement.

The Australian Taxation Office has just released the super thresholds that will be applied from 1 July this year, as reported in Wealth Professional yesterday.
Part of the threshold changes will see the concessional contributions cap being increased from $25,000 to $30,000.

But Michael Hallinan, Special Counsel Superannuation at Townsends Business and Corporate Lawyers, says the flow on effect of this small increase means far larger increases at the non-concessional end, depending on if and when advisers and their clients decide to trigger the bring forward cap.

As it stands, a person can contribute six times the concessional cap to the non-concessional cap. They can then bring these non-concessional payments forward and contribute the value of three years’ worth in one hit.

Under the old thresholds, this would mean a bring forward payment of $450,000, however with the new ones a person could bring forward up to $540,000.
Chris Cornish, principal financial adviser at Avant Financial Services, is delighted by the news.

“It’s really significant – I find it exciting,” he said. “It’s going to enable people to get more money into superannuation and salary sacrifice more. The majority of my clients wish to do this.”

Special Counsel Hallinan said advisers need to consider now what strategy is best for their clients.

In the first strategy, the bring forward is triggered in the 2013/14 tax year and the maximum contribution of $450,000 is made. The investor can then make the next payment in 2016/17, up to the new maximum non-concessional contribution of $180,000.

However in the second strategy, investors will be able to contribute an extra $60,000 by waiting until the 2014/15 tax year to trigger the bring forward. This means they would apply the current $150,000 maximum non-concessional contribution this year, and then trigger the bring forward (with the new increased threshold) to contribute $540,000 in 2014/15.

“If the objective is to maximise non-concessional contributions then strategy B is the better strategy,” said Hallinan.
 
 
Contribution strategy
 
2013/14
 
2014/15
 
2015/16
 
2016/17
 
Total Contributions over the 4 year period
 
Strategy A
 
$450,000
 
NIL
 
NIL
 
$180,000
 
$630,000
 
Strategy B
 
$150,000
 
$540,000
 
NIL
 
NIL
 
$690,000
 
 
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