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Super changes spell an end to some rebates

The jury may well be out on the issue of whether this year is the end of the millennium or whether we have to wait another 12 months to truly and correctly celebrate.

However, one thing is certain – there are a number of changes to the rules that make this year of 1999 the last one in which you may be able to take advantage of the government’s superannuation policies.

The first of these can be referred to (in Bankers Trust parlance) as the “last of the 7.5 per cent solution”.

Any undeducted superannuation contribution made before 1 July will be subject to a 7.5 per cent saving rebate on the first $3,000 of contributions.

This savings rebate has been abolished effective 1 July.

The second change relates to the preservation rules that apply to the undeducted contributions that are made after 1 July.

Up until 30 June, these contributions will be ‘Restricted Unpreserved’ amounts.

After 1 July, the amounts contributed, even if they are undeducted, will be fully preserved.

Therefore, it could be advantageous for undeducted contributions to be made to a superannuation fund.

This will allow the funds to earn the returns in the superannuation environment and only be subject to a 15 per cent tax rate.

Having been made before 30 June, the undeducted contributions retain their character and will remain accessible under certain circumstances after 30 June.

Other issues with superannuation as we come to the end of the financial year are not ones that are terminating this year but are important issues nevertheless.

Spousal contributions are available which have two advantages.

Firstly, there is a rebate of up to 18 per cent for the first $3,000 of spouse contributions made in any financial year if the income of the spouse receiving the contribution is less than $10,800 per annum.

Secondly, if both partners have a superannuation account it is possible for each to receive a $93,731 tax-free amount from the superannuation fund if withdrawn after age 55. That is a combined tax-free amount of $187,462.

Thirdly, if both spouses had a superannuation account, it would be possible for them to effectively split their incomes in retirement.

If you were classified as being self employed you can claim a tax deduction on the first $3,000 of superannuation contributions plus 75 per cent of the balance up to the maximum contributions limit.

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