After initial announcements in relation to the superannuation changes on Budget night in May 2016 the final draft legislation has been released. The result is somewhat changed from the initial announcements so we are finally able to bring you a concise update on the changes. We do however caution that the legislation is still in draft format so may be bound to change however we think this may be unlikely as significant negotiation has been done to get it to this stage.
Concessional Contributions
From 1 July 2017, a maximum of $25,000 will be imposed regardless of the contributor’s age. This is reduced from $35,000 and $30,000 for those 50 and over, and those under 50 years of age respectively for the 2016/17 year.
Division 293 Tax
Related to concessional contribution changes is Division 293 tax changes. This is an increase to the 15% tax payable on concessional contributions if your income is above a certain threshold. Currently the threshold is $300,000 but from 1 July 2017 it will be reduced to $250,000 meaning that more high-income earners will pay additional tax on concessional contributions they make. Those whose income is over $250,000 will pay 30% tax on concessional contributions from 1 July 2017 as opposed to 15%.
The definition of income is quite broad so if you think you may fit into this category please contact to get a better understanding of the details and the impact to you.
Personal Deductible Contributions
From 1 July 2017, all individuals under 65 years of age (and those up to aged 74 who meet the work test) will be able to claim a tax deduction for personal super contributions. This will mainly affect the following people:
- Employees where an employer does not offer salary sacrifice arrangements
- Self-employed contractors who switch to employee status during the financial year and fail the 10% test due to employment income
Catch Up Concessional Contributions
From 1 July 2018, eligible individuals will be able to accrue unused Concessional Contributions and carry forward these amounts. In future years, they will be able to make contributions in excess of the annual cap. Amounts will be carried forward on a rolling five-year basis and will apply to unused amounts from 1 July 2018. To make use of this scheme the individual must not have a maximum total account balance of more than $500,000 to be eligible.
Non-Concessional Contributions
From 1 July 2017, the maximum contribution for a single year will be $100,000. The bring-forward rule will remain permitting a once-off contribution of three times the maximum annual contribution, or $300,000.
For the 2016/17 year, the current contribution maximum of $180,000 remains as does the 3-year bring-forward amount of $540,000.
From 1 July 2017 if your superannuation balance exceeds $1.6 million you will not be permitted to make additional non-concessional contributions.
If your combined superannuation account balances are close to the maximum threshold of $1.6 million, please discuss with us your options as there are transitional rules that will apply.
Transfer to Retirement Income Stream (TRIS)
TRIS pensions will no longer be afforded the tax exemption on earnings from 1 July 2017. After this date the earnings on these pensions will be taxed at 15%. There is no change to the way the individual receiving the TRIS will be personally taxed.
Want to know more?
If you would like to know more about our Superannuation Services, click here.
Otherwise feel free to contact us and organise a time to interview one of our advisers.
Disclaimer: Any advice provided in this document is General Advice Only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. If any products are detailed on this document, you should obtain a Product Disclosure Statement relating to the products and consider its contents before making any decisions. While all care has been taken in the preparation of this newsletter, RIAA does not warrant or represent that the information is accurate, complete or current.
