2016 Federal Budget Superannuation Changes Have Now Received Royal Assent - Hervey Bay Accountant

December 6, 2016

 

The changes to the superannuation system, announced by the Australian Government in the May 2016 Budget have now received Royal Assent. Most of the changes will commence from 1 July 2017.

 

There is a limited opportunity to take advantage of the existing rules, particularly with those that were intending to transfer significant assets or wealth (such as proceeds from sale of shares or property owned personally) to superannuation).  For those  who were seeking to do so, please contact your financial planner or if you don’t have one, contact us so we can refer you to one.

 

Get up with the lingo before you read on;

 

Concessional Contributions - formerly "tax-deducted" contributions. E.g compulsory employer superannuation guarantee contributions, salary sacrificed contributions, self-employed contributions you have claimed as a tax deduction.

 

Non-Concessional Contributions - "post-tax" contributions E.g voluntary contributions from your after-tax salary or member contributions.

  • Introducing a Transfer Balance Cap of 1.6M for pension phase accounts

    • From 1 July 2017, there will be a $1.6 million cap on the total amount that can be transferred into the tax-free retirement phase for account-based pensions. There are measures to result in a similar outcome for those with defined benefit funds.

    • Also note, from 1 July 2017, individuals with a total super balance above $1.6 million at 30 June of the previous year will no longer be eligible to make non-concessional contributions.
       

  • Removal of the 10% Rule – a significant door for tax-planning re-opens

    • Previously an individual could only claim a tax deduction for superannuation contributions if their wages income was less than 10% of their total income

    • This has been quite limiting.

    • Now, anyone can claim a deduction for superannuation contributions they make to super – this means the freedom and ability to use superannuation to reduce taxable income where you have a higher than normal taxable income such as where you have a substantial capital gain from the sale of shares or property (subject to contributions caps as below)

  • Lowering the non-concessional (post tax) contributions cap to $100,000 per annum

    • From 1 July 2017, non-concessional (after tax) contribution cap reduces from $180,000 to $100,000 per year.

    • Remains available to individuals aged between 65 and 74 if they meet the work test.

    • The “bring forward” for up to two years of contributions (allowing you to effectively contribute 3 years of contributions into Year One for example) is still available if an individual is aged under 65. The bring-forward amount is determined by the total super balance on the day prior to the financial year contributions that triggers the bring-forward.

    • Individuals with a total super balance above $1.6 million at 30 June of the previous year will no longer be eligible to make non-concessional contributions.
       

  • Lowering the concessional (pre-tax) concessional contributions cap to $25,000 per annum for all individuals regardless of age

    • Applies from 1 July 2017

    • Down from current caps of $30,000 p.a for those under 50, or $35,000 for those 50 and over.
       

  • Carry-forward concessional contributions of unused caps over 5 years

    • From 1 July 2018, individuals will be able to make 'carry-forward' concessional super contributions if they have a total super account balance of less than $500,000. They will be able to access their unused concessional contributions cap space on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire.

    • The first year in which you can access unused concessional contributions is the 2019-20 financial year.
       

  • Changes to Pensions – Changes to TRIS

    • A “Transition to Retirement Income Stream” (TRIS) is currently used by individuals who are still working, but drawing a pension from their fund.

    • Significantly, under the current rules, once a balance has been converted to “TRIS” phase, the income of the super fund (used to support the TRIS) are tax free.

    • From 1 July 2017, earnings on superannuation assets in a “TRIS” phase will no longer be tax free and will be taxed at 15% as per accumulation phase accounts.

  • Reduction of Division 293 Income Threshold to $250,000

    • Reduced from applying to individuals with $300,000 of income to those with $250,000 of income

    • Those over the threshold have an additional 15% tax imposed on the whole amount of their contributions
       

  • Changes to Super Tax Offset

    • Currently, a tax offset of up to $540 is available if you contribute to your spouse’s superannuation where your spouse is a low-income earner *Conditions Apply

    • From 1 July 2017, the income that the spouse can earn has increased, to between $37,000 - $40,000

  • Low Income Super Tax Offset Contribution

    • Similar to the existing co-contributions that have been in place

    • Designed to effectively remove the tax on concessional contributions that would otherwise be paid by your superfund, for low income earners

    • From 1 July 2017, eligible individuals with an adjusted taxable income up to $37,000 will receive a LISTO contribution to their super fund -equal to 15 per cent of their total concessional (pre-tax) super contributions for an income year, capped at $500.

 

 

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