Superannuation Changes (passed by law)

[Andrew Williams]

Reduction in Concessional Contribution (SalarySacrifice/Pre-Tax Contributions) Cap

Status: Passed

Effective: 1 July 2017

The concessional contribution (CC) cap will reduce to $25,000 pa for all individuals regardless of age. The cap will be indexed in line with AWOTE in $2,500 increments.

 

Individuals with sufficient surplus cash-flow could use the opportunity to maximise CCs for amounts made before 1July 2017 up to $35,000 for those who were 49 or over on 30 June 2016 and up to $30,000 for those under age 49.

 

SMSF trustees should be mindful from1 July 2017 of unallocated reserves if any which may, when allocated, get counted towards the CC cap.

 

 

Changes to Non Concessional Contribution (Post-tax Contributions) Cap

Status: Passed

Effective: 1 July 2017

The non-concessional contribution (NCC) cap will reduce from $180,000 to $100,000 pa. Individuals cannot make NCCs if they have a total super balance of $1.6 million or more at 30 June of the previous financial year. Eligible individuals will be able to access a three year bring forward of up to $300,000. Transitional measures will apply to the bring-forward rule.

 

 

​Personal Deductible Contribution Changes

Status: Passed

Effective: 1 July 2017

 

All individuals under the age of 75 will be eligible to make personal contributions for which they can claim a tax deduction up to the CC cap.

 

Currently, individuals need to meet the 10% test (maximum earnings as an employee condition) to be eligible.

 

This will enable people in a range of situations to make personal deduction contributions and potentially target the CC cap where that is currently not possible.

 

Key examples include people who:

 

are employed and receive SG contributions that are within the CC cap, but their employer doesn’t offer salary sacrifice arrangements

switch from being a self-employed contractor to an employee during the course of a year and fail the 10% test due to employment income, and

are residents for tax purposes who are working overseas for a foreign employer and their employer can’t or won’t contribute to an Australian super fund.

 

 

 

Catch-up Concessional Contributions

Status: Passed

Effective: 1 July 2018

 

Individuals with super balances less than $500,000 will be able to access a higher annual cap and contribute their remaining unused CC cap on a rolling basis for a period of five years. Only unused amounts accrued from 1 July 2018 can be carried forward.

 

This will enable individuals who take time out of work or work part-time to make catch-up contributions when they accumulate lumpy income or decide to go full-time.

 

An opportunity exists for those who intend to sell a CGT asset in the future where they can accumulate the amount of unused CCs.They can then make a lump sum unused CC to offset the CGT liability on the sale of an asset by making a personal deductible contribution.

 

 

Changes to TTR Income Streams

Status: Passed

Effective: 1 July 2017

Earnings and gains from investments held in a Transition to Retirement (TTR) pension will no longer be exempt and will be taxed at 15%.

 

This change will apply to existing and new TTR income streams irrespective of the commencement date.

 

Individuals will also no longer be allowed to treat certain superannuation income stream payments as lump sums for tax purposes.

 

This change will have a significant impact on individuals running a TTR aged less than 60. This is because they will also pay tax on income payments, thereby negating the tax benefit for certain income earners.

 

However, the strategy may still be beneficial when used for its intended purpose (ie for individuals wishing to reduce employment hours while maintaining their cash-flow at current levels).

 

CGT relief is available for super funds for capital gains realised on the transfer of assets from pension phase before 1 July 2017.

 

 

Introducing Transfer Balance Cap

Status: Passed

Effective: 1 July 2017

The total amount of super monies that can be transferred to pension phase will be capped at $1.6 million. The cap will be indexed in $100,000 increments in line with CPI.

 

An apportionment approach will be used to determine how much cap space is available. Individuals in excess of the transfer balance cap on 1 July will need to either:

 

transfer the excess amount to the accumulation phase, or

withdraw the excess amount from their super fund.

 

 

CGT relief will be provided to all complying super funds to adhere with the transfer balance cap rules. The CGT relief will enable funds to reset the cost base of assets reallocated from pension to accumulation phase before 1 July 2017 to comply with the transfer balance cap rules.

 

 

 

 

 

Regards

 

Andy

 

 

Please note that the above information is general information only and should not be taken as financial advice.