Changes to superannuation – the end of unlimited, tax effective superannuation

Neil Rogan

“Now that the Government has finalised legislation for super reforms, there is some certainty over the changes that will come into place on 1st July 2017.

“What the legislation shows is that making additional contributions to super may no longer be the best option for investors planning for their retirement. Those savers likely to exceed the $1.6 million superannuation balance cap should review their options and consider alternatives to help supplement their superannuation.

“One alternative that can be very effective is an investment bond. We have seen an increased level of enquiries from people wanting information on bonds since the superannuation reforms were first proposed in the 2016 Federal Budget. Now that the reforms have been confirmed we expect the enquiries to continue given that bonds are a simple, flexible way for investors to supplement their super.

“Investment bonds can provide many benefits. There is no limit to the amount that can be invested, which makes them an attractive option for those who will face limits to what they can concessionally and non concessionally contribute when the changes come into effect. Bonds are also flexible, providing access to funds at any time, but after 10 years there is no personal tax to pay on withdrawals. Another advantage is that bonds allow for additional contributions of up to 125% of the previous year’s contribution each year.

“Despite the changes to legislation, superannuation remains a very effective way of saving for retirement, but for Australians who will be affected by the new rules next year, and for those who want to contribute more than the maximum tax effective contribution, investment bonds can be a very robust option worthy of consideration,” Mr Rogan said.

By Neil Rogan, General Manager, Investment Bonds at Centuria