13 Mar 2019
Retirement
Why is there a super cap of $1.6 Million?
By Emily Matthews | Financial Advisor at Future Key Financial

While your superannuation is in accumulation phase, the earnings on your superannuation capital is taxed at the concessional tax rate 15%. Once your superannuation commutes to pension phase, there is no tax payable on earnings.

By restricting additional contributions in excess of Employer Contribution for superannuation balances over $1.6 Million, you are forced to accumulate your wealth outside of super. This generally leaves you in a position of paying tax on your earnings at your marginal tax rate, which can be up to 47% (including Medicare Levy) should you earn over $180,000 per annum. A summary of marginal tax rates for the 2018/19 Financial Year below:

Income Marginal Tax Rate

(Excluding Medicare Levy)

Tax Payable
$0 – $18,200

0%

Nil
$18,201 – $37,000

19%

19 cents for each $1 over $18,200
$37,000 – $90,000

32.5%

$3,572 plus 32.5 cents for each dollar over $37,000
$90,001 – $180,000

37%

$20,797 plus 37 cents for each dollar over $90,000
$180,001 and above

45%

$54,097 plus 45 cents for each dollar over $180,000

 

That’s a huge difference in tax rates which provides significantly greater tax revenue for the government.

There are ways to get more money into super once your balance is over $1.6 Million – T&C’s apply. In addition, there are investment strategies available outside of super which have great tax advantages.

To find out more, contact us today.

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Daniel Mathers is an authorised representative (1238174) of Hunter Green Pty Ltd (AFSL 225962). Emily Matthews is an authorised representative (1261200) of Hunter Green Pty Ltd (AFSL 225962). Future Key Financial Pty Ltd ACN 608 953 840 is a Corporate Authorised Representative (1238170) of Hunter Green Pty Ltd (AFSL 225962). The information on this website contains general information and does not take into account your personal objectives, financial situation or needs. We recommend that you seek for specific financial advice if you require advice that takes into account your personal circumstances.