Recently you answered a question and advised that someone making additional contributions to a PSS defined benefit scheme would be able to claim a tax deduction for additional personal contributions up to the cap. I was interested in this as I am in the same position.
I checked the Tax Office website and it stated "you are able to claim a deduction for personal contributions for contributions made on or after July 1, 2017, provided the contributions were to a fund that was not a Commonwealth public sector superannuation scheme in which you have a defined benefit interest".
From this I would not think I could claim a deduction for my contributions post July 1, 2017. Could you please confirm if I am correct?
It is somewhat complicated. From July 1, 2017, the government will allow all Australians aged under 75 who make personal contributions, (including those aged 65 to 74 who meet the work test) to claim an income tax deduction for any personal superannuation contribution into an eligible superannuation fund. These amounts will count towards the individual's concessional contributions cap, and be subject to 15 per cent contributions tax.
However, members of many defined benefit funds, including PSS, will not be allowed to claim a tax deduction for any additional contributions to that fund. But, they will still be able to make a personal contribution to a separate accumulation fund and claim a tax deduction provided they stay under the $25,000 cap. The complex bit is working out if they have any unused cap available – this information can come only from their defined benefit fund. Obviously defined members considering making extra superannuation contributions after June 30 will need to ascertain their cap position before making the contribution. I am told that many defined benefits funds will be placing a cap calculator on their websites.
We are looking at downsizing to extract some surplus from our existing home to add to super. If we draw on existing super to pay the deposit for our new (smaller) home, are we able to replace that money into our super on the sale of the old home or will we be subject to the current limit issues? Our existing super is well under the current $1.6 million cap.
Under the existing rules, if you sell after June 30, you will be subject to the new contribution caps, which are $100,000 a year for non-concessional contributions then. But if you are under 65 you may be able to take advantage of the bring-forward rules and contribute $300,000 each in one lump sum. If you are over 65 you would need to satisfy the work test, but cannot use the bring-forward rule.
There may be some good news. Provided the 2017 budget proposals regarding downsizing become law, you would also be able to take advantage of the new rules. These would enable you to put $300,000 each into super from the sale of your home, irrespective of what your ages were at the time of the contribution.
My wife and I are in our late 70s. We have an allocated pension and an accumulation super fund. We will need to reduce our assets in the pension account to less than $1.6 million each. I read that one way is to move assets from the pension account to the accumulation account. However, I understood that persons over 75 cannot add to their accumulation account. Please advise.
This is a rollback not a contribution. Therefore, the age limits do not apply.
My wife and I are both on a full age pension and we own our home. We intend to move into a home my daughter owns rent free. If we sell our house for $600,000 and use the money for travel etc, will this affect our pensions?
Your home is now an exempt asset which is why you are receiving the full pension. However, once the home is sold it ceases to be exempt and the funds will be fully assessable and you may cease to receive the full pension. The good news is that you will become a non-homeowner and therefore subject to a more generous assets test. I suggest you canvass all options with your financial adviser before selling the home.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: asknoel@fairfaxmedia.com.au.