In the 2016 Budget, significant changes to Australian superannuation legislation were announced by the Government. Treasurer Scott Morrison noted, “This represents the most significant change to protect the flexibility and ensure the sustainability of superannuation in more than a decade.”
Read on to find out if you are affected by the changes that took effect on 1 July 2017, and know what you can do in response.
The amount of annual pre-tax income you can contribute to your super will be reduced to $25,000 per annum for all individuals from 1 July.
This is taxed at 15%. Concessional contributions above this cap will be taxed at your marginal tax rate plus an excess concessional contributions charge. Individuals with incomes over $250,000 are required to pay an additional 15% tax on concessional contributions.
From 1 July 2017 the 10% rule has been repealed and individuals who are wage and salary earners are able to make personal contributions to superannuation and can claim a tax deduction.
From 1 July, after-tax contributions are set at four times the concessional contributions cap ($25,000 for 2017-2018), which is $100,000 per year.
For individuals under age 65, you are eligible to bring forward up to two years of non-concessional contributions. Therefore, considering the reduction, you will be able to make non-concessional contributions of up to $300,000 in one year using the bring forward rule. Transitional arrangements will also apply if individuals have utilised, but not maximised, the bring forward provisions in the previous two financial years.
If an individual has a total superannuation balance over $1.6 million then you are not able to make further non-concessional contributions.
The transfer balance cap is $1.6 million, which is the maximum amount of super you can transfer to a tax-free pension for retirement. This means that when starting an account based pension, any balance above the $1.6 million balance cap will need to remain in accumulation phase where it will continue to be taxed at the 15% tax rate applicable to Australian superannuation, rather than being tax free, or it can be withdrawn from the superannuation environment.
From 1 July 2017 earnings on a transition-to-retirement pension account will be taxed at the normal accumulation rate of 15%. It is only upon meeting a condition of release (i.e. – retirement or attaining age 65) that the earnings will be able to have the tax-free status. This means that the benefits of a transition to retirement income stream may be reduced, particularly if you are under 60, or someone who is earning a higher income.
If you are already on a TRIS, you might want to consider looking at this to see if it is still beneficial for you.
Want to know more about Australian superannuation changes and how you can best respond? Speak to our financial advisers to discuss the options. Find out more details about the retirement insurance and the services we offer here.
Source:
Super changes. (2017, May 31). Retrieved from
https://www.ato.gov.au/Individuals/Super/Super-changes/
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