Golden Opportunity To Boost Savings

Make the most of the budget changes to set yourself up for a better retirement

- Vita Palestrant

Every new financial year kicks off with a raft of super changes. If you want to maximise your savings in a tax-effective way you need to keep abreast of these developments. Your super balance will be all the better for it.

Colin Lewis, head of strategic advice at Fitzpatricks Private Wealth, says July is a good month to “put your house in order” given the rise in the super guarantee (SG) from 9.5% to 10% and in the concessional contribution cap from $25,000 to $27,500.

“People who are salary and wage earners, who are making voluntary contributions above their employer’s contribution, may want to revisit the amount they salary sacrifice to increase it.”

Lewis says for high income earners, the SG is usually incorporated into their salary package. “But for low income earners, it’s actually going to be 0.5% super. If the government had blocked it, low wage earners would have been impacted by it. Wage growth is not there. So for low income wage earners this is a pay rise.”

Although the government announced it would scrap the $450 a month threshold under which employers do not have to pay employees the SG, low paid workers will have to wait until next July to get super on every dollar they earn.

The cap on non-concessional (aftertax) contributions has also gone up, from $100,000 to $110,000, “which means that you may be able to contribute $330,000 rather than $300,000 with the bring-forward rule”. But you need to check all eligibility criteria before making contributions.

The other important change relates to the transfer balance cap (TBC), which has gone up from $1.6 million to $1.7 million thanks to indexation. The TBC is the maximum amount you can have in a tax-free pension account.