Superannuation: What is going to change?

In November 2016, the Federal Government confirmed significant changes to superannuation.

Given the fact that the value of assets in the Superannuation environment in December 2016 was $2.2 trillion (or 157% of GDP), any change to the superannuation legislation can have a wide-ranging impact.

Let’s review the changes and consider some planning opportunities prior to 30 June 2017.


Reduction to Concessional (Tax Deductible) Caps

From 1 July 2017, the Concessional Caps will be reduced to $25,000 per year, for all individuals, irrespective of age. Concessional Contributions made prior to 30 June 2017 are capped at $35,000 for those aged 50 and over and up to $30,000 for those under 50 years old.


Changes to Non-Concessional (Non-Deductible) Caps

The annual Non-Concessional Contributions Cap will reduce from $180,000 to $100,000 from 1 July, 2017. Going forward, there will be opportunities to access a 3 year bring forward of up to $300,000.

Individuals with a member balance of $1.6 million or more as at 30 June 2017, will no longer be able to make Non-Concessional Contributions.

Prior to 30 June 2017, Individuals may be able to utilise the current bring forward rules and contribute up to $540,000 regardless of members’ balance. This is an opportunity to maximise super contributions before the rules change on 1 July 2017.


Pension Transfer Balance Cap - $1.6 million

Under the current legislation, a member can have unlimited funds in a tax-free superannuation pension account. One of the most substantial changes in the new legislation will be a $1.6 million limit on how much a person can have in their tax-free super pension accounts. This limit is known as the Transfer Balance Cap (TBC).

If your member balance is more than the $1.6 million transfer balance cap on 30 June 2017, you will need to do one of the following:
• roll the excess amount to accumulation phase, or
• withdraw the excess amount from your fund.

It should be noted that even though the fund won’t be 100% tax free, the super environment is still a tax effective structure as income is taxed at 15% and capital gains at 10% when applying the CGT discount.


Capital Gains Tax Relief

In circumstances where a member is required to meet the Transfer Balance Cap and must transfer assets from pension phase into the accumulation phase, the legislation provides for Capital Gains Tax relief. Superannuation funds will be allowed to reset the cost base of their assets to the current market value, when transferring from pension to accumulation.

The reset of the cost base must take place prior to 30 June 2017. This will be a complex process and will be dependent upon your individual circumstances. Specific consideration is required for each asset to optimise potential tax benefits and opportunities.


Changes to Transition to Retirement Income Streams

From 1 July 2017, the tax-free status of the earnings from investments held in a Transition to Retirement (TTR) pension will no longer be applicable and instead will be taxed at 15%. This change applies regardless of the date of commencement of the TTR.


The Reduced Income Threshold for Division 293 Tax

Under Division 293 of the current legislation, individuals with an adjusted taxable income of over $300,000 pay an additional 15% on concessional superannuation contributions. From 1 July 2017, the threshold is reduced to $250,000.


The legislative changes require the Trustees of superfunds to act before 30 June 2017 to ensure compliance and tax efficiency of their superannuation funds. Contact your Client Manager or Jayde Klower at the office to discuss the more specific circumstances as they relate to you.


Written by Damien Cameron, Client Manager



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