A number of superannuation changes takes effect from 1 July 2019. What are they and how might this affect you? Read below to find out.
Carry-forward concessional contributions
The 2018-19 concessional contributions were capped at $25,000. If you didn’t use all $25,000, you are now able to ‘carry-forward’ the unused concessional contribution amount into your 2019-20 cap. This will be the first year where you can make additional contributions on top of your annual cap. Unused cap amounts can be carried forward for up to five years.
To be eligible, you need to:
- Have a total super balance of less than $500,00 at 30 June in the previous financial year, i.e. if your super balance is less than $500,00 at 30 June 2019, then your unused cap from 2018-19 can be carried forward into 2019-20.
- Meet the work test rules if you’re aged 65 or over
- Create a notice of intent to claim a deduction for any concessional contributions (same as before)
Work Test Exemption
New legislation taking effect from 1 July 2019 allows retirees aged 65 to 74 with a total super balance below $300,000 to make concessional super contributions in the first year where they don’t meet the work test.
The work test currently states those aged 65 to 74 years need to have worked at least 40 hours in 30 consecutive days within a financial year to be able to contribute to super.
Being able to still contribute to super in the first year of retirement gives retirees more time to grow their super pot before they become ineligible.
Protecting Your Super Reforms
The government passed the ‘Protecting Your Super’ reforms in March this year, which takes effect from 1 July 2019. The legislation has been introduced as an initiative to protect retirement savings. Here are a few of the changes taking effect:
Insurance in super
Any super funds that haven’t received a contribution or rollover for more than 16 months will have the insurance component cancelled. Super providers would have contacted you about this and given you the opportunity to continue the insurance. For more information, check out our article on Changes to Insurance in Super from 1 July 2019.
Inactive low-balance accounts
If you have a super fund that’s been inactive for 16 months with a balance of less than $6000, your super provider will need to report and pay the unclaimed super money to the ATO. Once the ATO has received it, they will distribute it to your active super fund (if you have one) within 28 days.
Creating a myGov account would be useful if you haven’t already got one, as linking your myGov account to the ATO will list any super accounts you may have forgotten about.
Changes to fees
If you have a super balance below $6000, there is now a 3% cap on administration and investment fees.
Exit fees are also banned, so if you want to switch super funds you won’t need to pay for switching.
Super funds can often be worn down quickly from insurance and admin fees that super providers charge. All of these measures introduced by the government are aimed at protecting super pots and helping people reclaim money they’ve previously worked for.
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Disclaimer: This post has been prepared for general information purposes only. It is not specific advice to any particular person. You should consult an authorised Align Financial adviser before making financial decisions. Align Financial | Financial Planner Northern Beaches | Servicing North Narrabeen, Narrabeen, Mona Vale, Elanora Heights, Newport, Avalon, Palm Beach | Enquire with us online