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 yves@affluenceprivate.com.au 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.

As I understand your time is extremely valuable and scarce, I am able to offer flexible meetings times, including outside business hours and during the weekend. I can even come and meet you somewhere convenient, or talk via videoconference on Skype.

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Please contact me on yves@affluenceprivate.com.au or call me direct on 0432 885 295. You can follow me on Twitter @YvesSchoof or connect with me on LinkedIn to receive new articles.

DISCLAIMER
Yves Schoof and Affluence Private Wealth are Authorised Representatives of Synchron, AFS Licence No. 243313. 

The information posted is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation or needs.
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