As our previous blogs have shown, the Government’s Superannuation Reforms package was announced in the 2016-17 Budget and then amended in September 2016. Legislation to implement the Government's Superannuation Reforms was passed in Parliament on 23 November 2016.
Important Superannuation Reform Changes
These changes take effect from 1 July 2017 as follows:
- An individual can transfer $1.6 million of their total superannuation balances into the tax-free retirement phase. Subsequent earnings and growth on the transferred balance will not be capped or restricted.
- In calculating the $1.6 million transfer balance cap, there are transitional CGT ‘cost base’ reset relief measures, which apply on an asset by asset basis and only applies for those in pension phase prior to 1 July 2017 (including those in transition to retirement income stream).
- Any amounts in excess of a member’s personal transfer balance cap can continue to be maintained in the accumulation account of their super fund and concessionally taxed at 15 per cent.
- Transitional arrangements will apply for people already retired with balances above $1.6 million but below $1.7 million on 30 June 2017, and they will have 6 months from 1 July 2017 to bring their balance under $1.6 million. Any excess above a member’s transfer balance cap of $1.6 million will give rise to notional earnings of around 9.2% on the excess transfer balance cap based on a daily calculation.
- The threshold at which high income earners pay additional contributions tax (Division 293) will be lowered from $300,000 to $250,000.
- The annual cap on concessional superannuation contributions will reduce to $25,000 for all individuals regardless of age
- The annual cap on non-concessional superannuation contributions will reduce to $100,000 with individuals under 65 years of age able to bring forward up to 3 years of non-concessional contributions, dependent on their superannuation balance as at 30 June of the previous year. However, individuals with a balance of $1.6 million or more, as at 30 June the previous year, will no longer be eligible to make non–concessional contributions.
- Individuals aged between 65 and 74 years of age will be eligible to make annual non–concessional contributions of $100,000 if they meet the work test (that is they work 40 hours within a 30 day period each income year).
- All individuals under 65 years of age, and those aged 65 to 74 who meet the work test, will be able to claim a tax deduction for personal contributions to eligible superannuation funds up to the concessional contributions cap.
- The Government will remove the tax exempt status of income from assets supporting Transition to Retirement Income Streams. These earnings will now be taxed concessionally at 15 per cent.
From 1 July 2018, the Government will help people ‘catch–up’ their superannuation contributions by allowing individuals with a total superannuation balance of less than $500,000 just before the beginning of a financial year to carry forward unused concessional cap space (for up to 5 years) to use if they have the capacity and choose to do so.
Current Superannuation Details
From now until 30 June 2017, you will still be able to make the following concessional and non-concessional superannuation contributions:
- The annual cap on concessional superannuation contributions is $30,000, or $35,000 for those 49 years of age or over on the last day of the previous financial year.
- The annual cap on non-concessional superannuation contributions are $180,000, with individuals under 65 years of age able to bring forward up to 3 years of non-concessional contributions.
- However, if an individual has not fully used their non-concessional superannuation limit before 1 July 2017, the remaining brought forward amount will be reassessed on 1 July 2017 to reflect the new annual caps of $100,000.
It is important to ensure you have plans in place prior to these changes taking effect. Get in touch with BLG Business Advisers online or by calling (02) 4229 2211, to discuss how we can tailor a solution for you.