The new financial year almost always brings changes to the superannuation rules. This year is no different. Super is a major part of our financial lives that affords us the opportunity to retire in comfort, so it pays to understand the rules and make the most of them. 

The changes this year aren’t huge but are still worth knowing about. What most sets super apart from other investments is its tax sheltering features. There are tax concessions on contributions, on the ongoing fund earnings, and when converted to a pension account in retirement.

The change that will affect the most people is an increase in employer Super Guarantee contributions from 11.5 per cent to 12 per cent. It is an extra cost for most employers and will increase workers’ retirement benefits by just over four per cent over a lifetime of work.

There are two aspects of this change that will affect some people. First, those who are employed on a ‘total employment cost’ package will find they receive a small cut in their take home pay because a little more of their gross income must now go into super.

Secondly, people who sacrifice part of their salary into super may need to check that the increase doesn’t put them over the contribution limit, especially if they receive a pay rise during the year. The limit is $30,000 for total employer and employee contributions. The tax on any excess can be high.

The Government co-contribution scheme is popular with some lower income earners. They can earn a free $500 contribution into their super from the Government every year. That plus earnings adds up. People qualify by putting $1,000 in super themselves without claiming a tax deduction for it.

The allowable income limits have increased. Those who earn up to $47,488 will now receive the full $500 co-contribution. People earning up to $62,488 will be eligible for part of the $500 bonus.

People with large super balances can benefit from an increase in two limits. The Total Super Balance is the total of all of a person’s super accounts and determines how much extra, if any, they can contribute. The limit has increased from $1,900,000 to $2,000,000.

This limit means people with more than $1,760,000 in super will not be able to make the maximum contributions that everyone else is allowed. This is a complex area needing specialised advice.

The Transfer Balance Cap is the maximum amount of super a person can convert to a tax-free retirement pension. It has also increased from $1,900,000 to $2,000,000. Any extra amount must remain in a taxable super accumulation account or be cashed out of super.