Jamie McIntyre - April 13, 2017

Superannuation reforms have been passed, with the changes most likely commencing 1st July 2017.

Key changes include:

New - Reduction of concessional (pre-tax) contributions cap to $25,000

The reduction of concessional contributions will be for all individuals regardless of age, from 1 July 2017.

Currently it is $30,000 but restricted for those less than 49 years old in the previous year, or $35,000 for those aged over 49 years old in the previous income year.

This is your last chance to use these higher caps prior to June 30.

Concessional contributions can include employer Superannuation Guarantee, salary sacrifice amounts and contributions claimed as deductions in personal tax returns.

New - Allowing a catch up regime for super funds with a balance of $500,000 or less

Members with low contribution amounts or interrupted work capacities (such as mothers taking time out of the workplace) will be able to catch-up on their superannuation.

This catch-up rule from 1 July 2018 will allow members to carry forward unused concessional contribution caps on a rolling basis for up to 5 years, if the account balance is $500,000 or less.

The increased flexibility for making catch-up payments will make it easier for people with interrupted work patterns to save for retirement and benefit from tax concessions.

Individuals aged 65 to 74 years old who meet the minimum work requirements test will also be given access to the new catch-up arrangement.

Lowering the annual non-concessional (after tax) contributions cap

The non-concessional contributions cap will be lowered to $100,000 from 1 July 2017.

Individuals under 65 years old will still be able to bring forward three years of non-concessional contributions.

Individuals who have a balance of $1.6 million or more will no longer be eligible to make non-concessional contributions.

A $1.6 Million transfer balance transfer cap

Individual members of superannuation funds will be limited to a tax-free amount of $1.6 million when transferring money to their retirement phase.

Savings in excess of $1.6 million can remain in superannuation in accumulation phase where it will be taxed at a rate of 15%.

For those already in pension phase and more than $1.6million, excess funds above this will need to be moved from pension phase to accumulation phase within super by 1 July 2017.

Other noteworthy reforms include:

• As of 1 July 2017, the income threshold for Taxation Division 293 will be reduced to $250,000 from its current $300,000, raising the tax rate to 30% rather than 15%;
• Individuals up to 75 years of age will be able to claim personal deductions for super contributions without testing the proportion of employee v’s self employed income that was received;
• Introduction of the Low Income Superannuation Offset. This will allow individuals with a taxable income of $37,000 or less to receive refunds of tax paid on concessional contributions.

Jamie McIntyre.

Wealth Specialist

MAC Financial