Baby boomers could save thousands of dollars if they take advantage of their pre-1983 super and the related tax benefits.
The Federal Government's decision to crystallise pre- and post-1983 contributions made this opening possible for those aged 50-59, Partners' Superannuation Services director Martin Murden said.
Super funds will be required to calculate the pre-July 1983 component as a fixed amount based on the value of the component as at 30 June 2007, but going forward, the pre-July 1983 component will become non taxable.
According to Murden, by combining multiple accounts before 30 June, a larger proportion will be treated as tax exempt. Also by making additional contributions to the pre-July 1983 fund, they will be able to maximise on tax savings.
"Many people are totally aware of this potential windfall, let alone the fact that they have personal super contributions dating back to the inception of super in the 1970s," Murden said.
Those most likely affected by this are workers who worked for large firms that encouraged employees to take out superannuation or people running their own businesses, Murden said.
"In fact, it was not uncommon for people starting businesses to commence a self employed or personal superannuation policy with a life office. From the feedback I'm getting is that many of these have been left dormant once businesses have grown or when people have started a self managed super fund."
According to Murden, there are two ways of maximising pre-1983 contributions:
Make additional contributions to a fund that has a pre-July 1983 eligible service date. To do this, you must still either have the same super fund or on every occasion that you have changed funds, have rolled over your contributions. This could have the effect of moving 20-40 per cent of the extra contribution into the pre-July 1983 component which will be tax exempt after July this year.
Or, amalgamate two or more funds where one has a pre- July 1983 start date. This will enable you to use your very first fund as the starting date of the newly amalgamated fund, enabling you to benefit from the nil taxation that will be applicable after June.
