Just how much can I put into super?
Earlier this year the Federal Government removed the hitherto cumbersome 'work test' that basically stopped anyone in retirement from contributing additional funds to super.
This means even if you are in retirement and still under age 75 years of age, you can now contribute funds, such as any funds you might inherit or the proceeds from the sale of an investment property into super.
The reasons this is so important is because once you put funds into super and use them to support a regular income stream, all the assets and capital gains generated by those funds is tax free.
So the question is just how much money can you put into super?
If you are still working you can contribute up $27,500 into super each financial year and claim a tax deduction for it. The trade off though is as soon as you do, you will be charged a 15 per cent contribution tax by the super fund.
Depending on your situation, you might be able to contribute more and claim it as a tax deduction if your haven't used your full entitlement in previous years. Your tax agent will be able to help you with this.
In addition to this amount, you can contribute up to $110,000 a year of after tax money into super. You won't be able to claim any of this as a tax deduction but then you won't charge the 15 per cent contribution tax either.
There is also a three year bring forward rule, where you can contribute up to $330,000 of after tax money to super in any financial year, but you then can't contribute any more for the next two financial years.
Finally, you can also contribute up to $300,000 of funds to super under the down-sizer rules. There are a number of rules surrounding this such as you must have owned your home for ten years or more and contribute the funds within 90 days of selling your home.
Importantly, the age limit for this has recently been dropped to age 55.
All of these amounts apply to you as an individual but needless to say if you are part of a couple, you can effectively double these contributions. So if for example you decided to down size and released some $1.26 million in liquid assets from the sale of your home, you and your partner could contribute the full amount of this immediately to super.
So you could each contribute some $300,000 under the downsizer rules and $330,000 each under the three year bring forward rule. You could increase this contribution to $1.48 million if you contributed say, $220,000 in June of one financial year and $1.26 million the following month.
Needless to say the rules surrounding these contributions are complex and easy to get wrong, so you would be best advised to seek professional advice before you try to move such large amounts into super.