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New superannuation rules explained

In case you missed it, the money world is agog with the superannuation changes promised in last year’s Budget. As a consequence, we’re told would-be retirees are dumping property to get money into superannuation before July 1.
If this is you or will be you, take the tip to do your homework before you rush headlong into ridding yourself of your investment property or even your business.
By the way, the changes are relevant for everyone involved in super but baby boomers are the most excited group at the moment.
The big giveaway from Treasurer Peter Costello is the opportunity to slam $1 million into superannuation before July 1. And while anyone can do this, you do have to wait until you retire to access this money once it goes into superannuation. That’s why 50-year old pluses are more interested in the play.
Of course, a 40-year old who gets a big lump sum into superannuation for 15 to 20 years would, in all likelihood, be handsomely rewarded in retirement. Superannuation delivers the best results when money is in and compounding for as long as possible.
Another big Costello present is the fact that your super money won’t be taxed after you hit 60-years of age.
Right now a retiree accepting $50,000 a year from a super-created pension and say $25,000 income from an investment property, now pays $11,475 in tax but this will shrink to $412 from July 1.
That’s $11,063 extra to a retiree and so getting an extra million into superannuation tax free makes a lot of sense.
That said, not everyone has to rush. From 1 July, you can put up to $450,000 over a three-year period extra into superannuation over your compulsory super or your salary sacrificed amounts.
By the way, being a couple means you could get $900,000 into superannuation over that period and if the same couple was lucky to get a million dollars each into superannuation before the key date, they could get $2.9 million into super.
And get this, a business owner couple who sells their business before 1 July could get $4 million into superannuation because there is a lifetime amount - $1 million each - that business sellers can roll into super, tax free. However there are some rules to access this unbelievable gift.
If you throw in the $900,000 from July 1 then the total amount could be as high as $4.9 million.

Doing all of this means you have to be aware of capital gains tax rules and a whole load of other rules, and so as you can see, some homework is essential. But as I always argue - what’s worth doing is worth doing for money. 

Published on: Saturday, March 17, 2007

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