How Recent Changes to Super Will Impact You
In November 2016, the government finally legislated its planned changes to superannuation.
While they are not as bad as they could have been, the changes to super will have a big impact for a lot of people.
Some changes are beneficial to individuals, however, the biggest impact will be on professional businesses like us here at The Planning Room. How we navigate our clients through many changes and amendments.
There are now more caps, limits, thresholds and complexity than there has been since simple super was introduced in 2007.
Now, more than ever, people need expert advice. They need to work together with experts to ensure they get the best outcome.
The reduction in the amount you can contribute to super (both pre and post-tax) now means it will be much harder to build your Super balance, you need to start planning early!
If you were planning on shifting large amounts of money into super, maybe as a result of a property sale or inheritance, you had best get cracking because the rules are changing from 1 July 2017 and if you miss this window, it will become much harder to get large amounts into super from that date.
To help you understand how these changes affect you, we will be publishing a series of articles digging into the detail. For now you can find a brief summary of the main changes below.
If you need any help, please get in touch!
Concession (pre-tax) Contribution cap reducing to $25,000 per annum
From 1 July 2017 the cap for tax deductible contributions (including SG and salary sacrifice) will reduce from the current cap of $35,000 for people age 50 or above or $30,000 for everyone else.
Non-concessional contribution cap reducing to $100,000 per annum
From 1 July 2017 the cap for contributions made from after-tax monies known as non-concessional contributions or “NCCs” will reduce from $180,000 per annum to $100,000 per annum. Transition arrangements are in place for those using the “bring forward” rule which mean you can still get up to $540,000 in this year. From next year you will only be able to make NCCs if your balance is below $1.6 million.
$1.6 million Pension cap
There will now be a limit of $1.6 million in Pension. Any amount in super over the $1.6 million will now need to be held in accumulation phase with the 15% applicable. There are a number of rules around this change for people already with pension and those yet to start a pension.
5 year catch up contribution
If you do not use all of your concessional cap in a year, you will now be able to carry forward your unused concessional contribution for up to 5 years and make a catch-up payment of up to $125,000. Your account balance needs to be less than $500,000 and it will only start accruing from 1 July 2018.
Personal Deductible Contributions for all
Gone is the 10% rule that restricted employees to only being able to salary sacrifice. From 1 July 17 everyone will be able to able to claim a tax deduction on lump sum contributions to super. You will still need to meet the age based rules around contributions and you will need to ensure you have enough assessable income to claim the deduction against.
Removal of Anti-detriment payments
From 1 July 17 there will no long be anti-detriment payment on eligible death benefits.
Changes to Transition to Retirement Pensions
From 1 July 17 TTR pensions will lose their tax free status and will now be taxed at up to 15%, the same as accumulation. Note that these type of pensions will not be counted under the $1.6 million cap.
Spouse Tax Offset threshold increasing to $37,000
From 1 July 17 the threshold will increase from $10,800 to $37,000 and cut out at $40,000. The tax offset remains at a maximum of $540 or 18% of amount contributed up to $3,000. Will not apply if the receiving spouse balance is $1.6 million or above.
Division 293 threshold reducing to $250,000
From 1 July 17 the threshold to pay an additional 15% contribution tax will reduce from $300,000 to $250,000.