Issue Number 30
March 2017

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Superannuation Reforms – impact of changes from 1 July 2017 for those with less than $1,600,000 in superannuation

On 23 November 2016 legislation to implement the Government's superannuation reforms proposed in the May 2016 budget were passed by both houses of Parliament. The major focus in the media to date has been in relation to the impact on superannuation for those that have more than $1,600,000 in superannuation.

There are a number of changes from 1 July 2017 that need to be understood by the majority of Australians (being those that do not have greater than $1,600,000 in superannuation). Those changes are:

  • If under age 65 and in receipt of a transition to retirement income stream (TRIS) the Fund’s income will be taxed at 15% (instead of being tax free);
  • The existing annual concessional contributions cap of $30,000 per year ($35,000 if aged 49 or older) has been reduced to $25,000 per year;
  • The existing annual non-concessional contributions cap of $180,000 per year has been reduced to $100,000 per year;
  • Individuals under age 65 will continue to be able to bring forward 3 years' worth of non-concessional contributions in recognition of the fact that such contributions are often made in lump sums;

There are transitional rules in relation the 3 year rule which has been summarised by the ATO as follows:

Total superannuation balance on 30 June 2017

Non-concessional contributions cap for the first year

Bring-forward period

Less than $ 1.4 million

$300,000

3 years

$1.4 million to less than $1.5 million

$200,000

2 years

$1.5 million to less than $1.6 million

$100,000

No bring-forward period, general non-concessional contributions cap applies

$1.6 million

$0

N/A

There are also transitional rules for those that triggered the 3 year rule prior to 1 July 2017.

  • The “work test” for people aged 65 has not been scrapped.  In order to make contributions after age 64 (to age 74), people must continue to meet a work test of 40 hours in a 30-day period in the financial year in which they want to contribute;
  • The threshold at which high income earners pay higher tax on their concessional contributions has been decreased from $300,000 to $250,000;
  • The requirement to be able to claim a deduction for personal superannuation contribution will no longer require earning less than 10% of your income from employment;
  • From 1 July 2017 an individual will be able to claim up to a maximum of $540 as a tax offset if they make a spouse contribution and their spouse’s income is less than $40,000. This compares to a spouse’s income needing to be below $13,800 for the 2016/17 year. The spouse rebate is based on a maximum amount allowed of $540 being $3,000 at 18%;
  • From 1 July 2018 individuals will be able to make “carry-forward” concessional (taxable) superannuation contributions. They can do this if their superannuation balance is less than $500,000. They will be able to access their unused concessional contributions cap space on a rolling 5 year basis. Amounts carried forward will expire after five years.

The first year that unused concessional contributions can be accessed is in the 2019/20 year.

For further information, contact your McLean Delmo Bentleys Advisor.

Rohan Mansfield
Partner Superannuation


 

Important: This is not advice. Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly.

We therefore recommend that our formal advice be sought before acting in any of the areas. This document is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.

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