How the post-election super changes affect Doctors

Yves SchoofBusiness, Investments, Tax

The Government has announced some changes to its 2016 Budget proposals in relation to superannuation.

Please find below a summary of the proposed superannuation changes and how they affect Doctors in particular.

Non-concessional Contributions

The $500,000 lifetime Non Concessional (i.e. after-tax) Contributions (NCC) Cap has been dropped. Instead, the Government has announced a reduction of the current annual limit of $180,000 to $100,000 from 1 July 2017.

This financial year you can still contribute $180,000, and use the bring-forward-rule to contribute $540,000. Going forward, the 3-year bring forward rule will remain as per the current provisions, but with the total amount thus reducing to $300,000. No NCC contributions will be allowed once the proposed $1.6 Million transfer cap has been reached.

Comment: This is good news for Doctors, as it still allows you to accumulate super savings via after-tax contributions, which typically happens towards the end of your career.
It also allows for forward planning and leaves the option to contribute a significant amount this financial year, which was not possible under the previously announced changes.

Concessional contributions

The reduction to a $25,000 CC cap will remain in place and commence from 1 July 2017.

The Government has confirmed that Division 293 tax on Super will be reduced to include individuals with salaries above $250,000 p.a.

Comment: Both measures disadvantage Doctors, as the low cap does not really allow for tax-effective salary sacrifice to super, compared to the much higher limits that were in place a few years ago. Given that Doctors start to accumulate super later than other professionals, I would expect Doctors to retire with less super going forward.

In addition, more (younger) Doctors will pay the additional 15% Division 293 tax, which will further negatively impact Doctor’s superannuation balances.

Proposed changes that have not been altered

The proposed $1.6 million lifetime cap on an individual’s total transfers to retirement income streams, has not been amended.

Comment: Doctors will be forced to plan their retirement funding much earlier, so they can build wealth in different tax-effective environments.

If you would like to know how these measures affect you personally, and how you can plan for these changes, please contact us for your obligation-free strategy session. Our details are or 08 6160 5918.

Yves Schoof
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Yves Schoof

Author | Specialist Adviser for Medical Specialists and Surgeons at Affluence Private Wealth
I specialise in managing and coordinating the financial affairs of medical professionals and have been recognised as one of the best financial planners in Australia. I am a Certified Financial Planner and member of the Financial Planning Association of Australia.

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