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.
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
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.