Super Changes Receive Royal Ascent
The new super changes announced by the Government in the May 2016 Budget have received royal ascent. Here is an overview of the changes:
Introducing a transfer balance cap of $1.6 million for pension phase accounts
From 1 July 2017, the Government will introduce a $1.6 million cap on the total amount that can be transferred into the tax-free retirement phase for account based pensions.
The transfer balance cap will be indexed in $100,000 increments in line with CPI.
Transition to retirement income streams (TRIS)
TRIS are currently available to assist individuals to gradually move to retirement by accessing a limited amount of their super. Currently individuals receiving a TRIS receive tax-free earnings on the super assets that support it.
From 1 July 2017, the Government will remove the tax-exempt status of the earnings that support a TRIS and the earnings will be taxed at 15 per cent regardless of the date the TRIS commenced.
Lowering the non-concessional contributions cap to $100,000 per annum
From 1 July 2017, the Government will lower the annual non-concessional contributions cap from $180,000 to $100,000 per year. This will remain available to individuals aged 65 to 74 if they meet the work test.
There is capacity to bring forward non-concessional contributions, $300,000 over three years, if the individual is aged under 65. The bring forward is not available to individuals aged between 65 and 74.
Individuals with a total super balance above the $1.6 million at 30 June of the previous year will no longer be eligible to make non-concessional contributions.
Reduction of concessional contributions cap to $25,000 per annum
Currently individuals can make concessional contributions up to $30,000 ($35,000 for people aged 50 and over).
From 1 July 2017, the government will lower the annual concessional contributions cap to $25,000 per annum.
The cap will index in line with wages growth.
Carry forward of unused concessional contributions caps over 5 years
From 1 July 2018, individuals with a total super account balance of less than $500,000 will be able to carry-forward unused concessional contributions cap 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 in the 2019/20 financial year.
Personal super contribution deduction
Currently an individual can claim a deduction for personal super contributions where they meet certain conditions, one of these conditions is that less than 10 per cent of their income is from salary and wages.
From 1 July 2017, this condition will be removed.
Reduction of Division 293 income threshold to $250,000
Currently individuals with income and concessional contributions in excess of $300,000 trigger a Division 293 assessment.
From 1 July 2017, the Government will lower the Division 293 income threshold to $250,000. An individual with income exceeding this threshold will have an additional 15 per cent tax imposed on the whole of their contributions up to their concessional contributions cap.
Spouse tax offset
Currently an individual can claim a tax offset of up to a maximum of $540 for contributions they make to their spouses eligible super fund, if amongst other things, the total of the spouses assessable income, total reportable fringe benefits and reportable super contributions is between $10,800 and $13,800.
From 1 July 2017, the spouse's income threshold will be increased to between $37,000 to $40,000. The current tax offset of up to $540 will remain. The offset is gradually reduced for income levels above $37,000 and completely phases out above $40,000.
Low income super tax offset contribution (LISTO)
The Government will introduce a LISTO, which will replace the Low Income Superannuation Contribution policy which has been repealed from 1 July 2017.
From 1 July 2017, eligible individuals with an adjusted taxable income of up to $37,000 will receive a LISTO contribution to their super fund. The LISTO will be equal to 15 per cent of their total concessional contributions for an income year, capped at $500.
If you are concerned that the Government's changes to superannuation will affect you, please contact this office to discuss your particular needs in detail.