Changes To Super Contributions Raise Two Very Important Questions

By Brett Cribb, Financial Adviser & James Marshall, Financial Adviser

Our recent article, Got your super contributions organised?, outlines changes to concessional and non-concessional super contribution caps. As a super fund member, you need to take action before 30 June 2017. Here we cover how to avoid penalties for exceeding the new super caps and how to make effective use of the funds that you will no longer be able to contribute to super.

Concessional contributions include your employer’s superannuation guarantee, salary sacrifice and personal deductible contributions and non-concessional contributions are those made using after-tax money.

The following table[1] summarises changes to super caps.

The revised caps raise two important questions for you:

Q1. Will your existing super contributions exceed the new caps come 1 July 2017?

High income earners and those who are currently making additional contributions to super need to review your contributions before 1 July 2017. If your current contribution strategy will result in a breach of the new caps, you could face tax implications or be subject to penalties. It’s important to revise your contributions strategy before June 30 to make sure your contributions are in alignment with the new caps.

Q2. What should you do with excess funds that you will no longer be able to contribute to super?

The reductions in concessional contributions caps introduced from 1 July 2017, may impact on your financial preparation for retirement, with less funds able to be contributed within the tax-efficient super environment. You will need to decide how to continue to accumulate the wealth required to fund the retirement lifestyle of your choice.

One option is to make after-tax contributions if you have not met the non-concessional cap. A second option is for you to invest outside of super. While investing outside of super may not offer the same tax-efficiencies as super, it could still help you save toward financial independence. For example, you may choose to build a portfolio via a regular investment plan held outside super while still retaining exposure to similar investment options. It’s important to discuss your options with myself or your adviser at Stratus Financial Group, as we can provide advice appropriate for your circumstances and financial goals.

Case Study

Chantal is 52 and her income is $200,000 pa. Given the superannuation guarantee of 9.50%, her employer’s super contributions are $19,000 pa. Chantal is currently salary sacrificing up to the maximum concessional contributions cap for her age. That is, her current cap is $35,000 and as $19,000 pa is contributed by her employer, Chantal’s salary sacrifice is $16,000 pa.

From 1 July 2017, Chantal’s concessional contribution cap falls to $25,000 pa, so she will need to reduce her salary sacrifice from $16,000 to $6,000 pa. This will leave her with ‘surplus’ income of $10,000 pa available for investment. Chantal will receive this as cash (taxed at her marginal tax rate) and then can either make a non-concessional or after-tax contribution to super, or invest in a portfolio outside super.

We can help you to review your super contributions or discuss your retirement savings strategies. Please contact Brett or James by phoning (07) 3007 2007 or emailing


Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Stratus Financial Group strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.

Taxation outcomes are illustrative only. Always confirm your tax position with a registered tax agent.