On July 1 2017, a number of superannuation changes are set to take place.
The changes include:
• Introduction of a transfer balance cap
• Concessional superannuation contributions cap reduced
• Concessional superannuation contributions tax threshold reduced
• Non-concessional contributions cap reduced and criteria introduced
• Low Income Superannuation Tax Offset to replace the Low Income Super Contribution
• Greater deductibility of personal contributions
• Allowing ‘catch-up’ concessional contributions
• More tax offsets for spouse contributions
• Changes to earnings tax exemptions
• Abolishing the anti-detriment rule
• Super Guarantee rate increase changes were previously legislated to increase according to the following timetable
Introduction of a transfer balance cap
A $1.6 million cap has been introduced on the amount that can be transferred to super in retirement phase when earnings are tax-free. Additional savings can remain in an accumulation account (where earnings are taxed at 15 per cent) or remain outside super. This comes into effect from 1 July 2017 and will be indexed in following years. Retired people with retirement phase balances below $1.7 million on 30 June 2017 will have 6 months from 1 July 2017 to bring their balances under $1.6 million.
Concessional superannuation contributions cap reduced
The annual concessional contributions cap has been reduced to $25,000 (from $30,000 for those aged under 49 at the end of the previous financial year and $35,000 otherwise).
Concessional superannuation contributions tax threshold reduced
The threshold at which high-income earners pay Division 293 tax on their concessional taxed contributions to superannuation has been reduced from $300,000 to $250,000.
Non-concessional contributions cap reduced and criteria introduced
The annual non-concessional contributions cap has been reduced from $180,000 to $100,000. In addition, criteria for an individual to be eligible for the non-concessional contributions cap has been introduced and other minor amendments to the non-concessional contributions rules have been made.
Low Income Superannuation Tax Offset to replace the Low Income Super Contribution
The Low Income Superannuation Tax Offset (LISTO) will replace the Low Income Superannuation Contribution from 1 July 2017. The LISTO refunds up to $500 of the tax paid on concessional super contributions for low-income earners with a taxable income of up to $37,000.
Greater deductibility of personal contributions
The requirement that an individual must earn less than 10 per cent of their income from employment to be able to deduct a personal contribution to their super to make it a concessional contribution has been removed. This will apply from the 2017-18 income year.
Allowing ‘catch-up’ concessional contributions
Individuals whose superannuation balance at the end of the previous financial year is less than $500,000 will be able to carry forward unused concessional cap amounts from the previous five years. This applies to working out an individual’s concessional contributions cap from the 2019-20 financial year onwards.
More tax offsets for spouse contributions
This increases the amount of income an individual’s spouse can earn before the individual stops being eligible to a tax offset for contributions made on behalf of their spouse. This will apply from the 2017-18 income year.
Changes to earnings tax exemptions
The earnings tax exemption has been extended to new lifetime products (including deferred products and group-self annuities). The earnings tax exemption for transition to retirement income streams has been removed. An integrity measure that will apply to self-managed super funds and other small funds has been introduced. These changes will apply from the 2017-18 income year.
Abolishing the anti-detriment rule
The anti-detriment provision which allows superannuation funds to claim a tax deduction for a portion of the death benefits paid to eligible dependants will be removed from 1 July 2017.
Super Guarantee rate increase changes were previously legislated to increase according to the following timetable
The Super Guarantee contribution rate is set to reach 12% in 2025
Industry Super Funds 2016
This article is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Integrity One Planning Services Pty Ltd is a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 (which is the holder of AFSL 225051). Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. We recommend that you seek personal advice from an advisor prior to implementing any of the information contained in this publication.