For the financial year ending on 30 June 2017, the previous superannuation concessions remain unchanged. In view of this, there will be opportunities to be taken advantage of prior to the new rules commencing on 1 July 2017. Now that the legislation has been passed into law, we have clarity on how the changes will apply.
Nearly everyone will be affected by the new rules in some way. The extent to which you will be affected will depend on where you currently are in superannuation life cycle. In view of this, we will need to work with you individually to tailor the best solution to your particular circumstances.
A very brief summary of the changes applying from 1 July 2017 is as follows:
- Removal of restrictions for making personal concessional contributions where more than 10% of income comes from salary.
- Ability to carry forward un-used concessional caps but only from 1 July 2018 and only if superannuation balance is below $500,000;
Increased access to Spouse tax offset;
- Low income tax offset capped at $500 to ensure tax on superannuation contributions does not exceed tax on take home pay;
- Removal of restriction on development of new retirement income stream products.
- How will it affect me?
- Removal of Anti-detriment payment (minimal effect).
- Pension accounts limited to $1.6M per member over all superannuation funds;
- Reduction of concessional contributions to $25,000 pa.;
- Reduction of non-concessional contributions to $100,00 pa but pension balance must be less than $1.6M in order to make these non-concessional contributions;
- Removal of tax-exempt status of earnings that support a transition to retirement pension.
Suffice it to say, the very significant bad news far outweighs the few crumbs of good news that will have little benefit, if any, for more self-managed superannuation fund members.
While keeping these changes in mind remember that the previous rules still apply until 30 June 2017 and this will provide some important planning opportunities. These rules are basically as follows:
- Maximum concessional contributions of $30,00 each for those eligible to make them with those over 50 able to contribute $35,000.
- Maximum non-concessional contributions of $180,000 for eligible taxpayers with a 3-year bring forward rule to increase the amount to $540,000 if eligible.
- Transition to Retirement Pensions still provide for income tax exemptions on pension income.