Changes to super that could put your retirement at risk

Have you been meaning to start making contributions to your superannuation fund, but somehow just keep putting it off until later?

While you might comfort yourself with the thought there is plenty of time left to provide for your retirement, time is in fact running out to super-size your savings.

The Federal Government has introduced a raft of changes to the superannuation laws, which will kick in on July 1.

These will affect people at all stages of their retirement journey, including those planning to make before or after-tax contributions; those earning more than $250,000 per year; anyone looking to transfer more than $1.6 million to a retirement income stream; those with a transition to retirement income stream; and workers planning to make contributions to their spouse’s super.

Hardest hit will be those who were looking to make concessional (before-tax) and non-concessional (after-tax) contributions to their superannuation fund in coming years.

In the past many people opted to pay off their mortgage or wait until their children had grown up and left home before they started ploughing more money into their super fund.

In the mid-to-late 2000s, you could salary sacrifice up to $100,000 a year into your super fund, ensuring a concerted push in the last few years of your working life was often enough to top up your balance nicely.

The cherry on top of this of course was that before-tax contributions such as those made via salary sacrifice were subject to the concessional tax rate of 15%, rather than your higher marginal tax rate – leaving even more money in your pocket rather than the tax office’s coffers.

In more recent times the Federal Government hasn’t been quite so generous, capping before-tax contributions at $35,000 per year for those aged 50 or over, or $30,000 per year for those under 50.

This has forced workers to start planning for life after work a lot further out, or face the prospect of putting their retirement at risk.

But from July 1 this cap will be lowered even further, limiting concessional contributions (including employer and salary sacrifice contributions) to $25,000 per financial year, regardless of your age.

The cap is coming down for non-concessional (after-tax) contributions as well, dropping from $180,000 this financial year to a maximum of $100,000 from 2017/2018 onwards.

Planning for your retirement has never been more important.

As the countdown to July 1 begins, why not check your most recent annual super statement to see how close you came to the new $25,000 pre-tax contribution cap.

If you have room to move, consider how much more you can realistically set aside to boost your overall contribution from July 1.

Your future self will thank you for it.