Changes to the Australian superannuation system have received royal assent (formal approval of an act of Parliament) and will take effect from 1 July 2017.
The information below provides an outline of the changes. We will continue to provide you with information regarding what you will need to consider prior to the commencement of the new legislation.
Please note - the information contained in this blog is of a general nature and does not take into account your personal circumstances. Please consult with your financial adviser before making any decisions based on the information in this document.
Contribution Caps From 1 July 2017
From 1 July 2017:
A concessional contribution cap of $25,000 p.a. will apply regardless of age, with further concessional contribution issues including:
- Removal of the existing 10% rule which currently restricts personal contribution deductions for individuals deriving ≥10% of total assessable income, reportable fringe benefits and reportable employer super contributions from employment
- A concessional contribution carry forward measure allowing individuals with a ≤$500,000 total superannuation balance (at the most recent 30 June before the deduction year) to carry forward (for up to six years including the deduction year) unused concessional contribution cap amounts relating to the 2018/19 and later income years
- Retention of the existing "work test" which requires individuals aged between 65 and 74 to work ≥40 hours in a 30 day period to be eligible to make contributions
Existing non-concessional contribution caps
Existing non-concessional contribution caps will be replaced with an annual non-concessional cap of $100,000 (equal to four times the above concessional contributions cap) and a three year bring forward rule allowing up-front contribution of a maximum $300,000 for the current and next two income years (if <65 years old).
Further non-concessional concessional cap issues will include:
- An important non-concessional contribution cap of nil will apply to an individual with a total super balance (as at the most recent 30 June) of ≥$1.6 million (e. such individuals will be unable to make non-concessional contributions although concessional contributions may still be made)
- Retention of the existing "work test" which requires individuals between 65 and 74 to work ≥40 hours in a 30 day period in order to be eligible to make contributions
Maximum pension transfers
Unlike the current unlimited superannuation balance which may be treated as in the tax-free pension / retirement phase upon an individuals’ retirement, from 1 July 2017, the maximum amount per person which may be transferred into tax-free retirement/pension phase will be $1.6 million (indexed in future $100,000 increments). Any excess amounts should be commuted to a 15% tax rate accumulation phase super account and/or withdrawn from super.
Less concessional treatment of the maximum 10% Transition to Retirement Income Streams (TRIS) available to individuals at or above preservation age such that supporting assets will be taxed at 15% rather than 0% and concessional lump sum treatment will no longer be available for TRIS drawdowns (from 1 July 2017).
High income threshold
A reduction in the threshold for the existing 15% additional high income earner concessional contribution tax from the current $300,000 ATI to a lower $250,000 ATI threshold together with expansion to additional individuals (eg. judges) who were not previously subject to the provisions (from 1 July 2017).
Low income superannuation tax offset
A low-income superannuation tax offset (LISTO) which will provide an effective tax refund up to $500 on concessional contributions made by individuals with ≤$37,000 ATI. The LISTO is designed to align the tax rate on concessional contributions with the taxation which would have occurred in the low income individual’s hands with the amount generally payable to the individual’s super fund (from 1 July 2017).
Low income spouse offset of up to $540 p.a. to a contributing spouse where the recipient low income spouse’s adjusted taxable income (ATI) is <$40,000 (from 1 July 2017).
For more information, please contact Ian Walker from Archer Gowland ianw[@]archergowland.com.au.