The wide ranging superannuation reforms originally announced in the 2016-17 Federal Budget have passed Parliament. As the majority of the reforms start from 1 July 2017, it’s important to consider how these might impact on you and whether you need to take any action before then.
Some of the key reforms include:
- Non-concessional contributions will be capped once your superannuation balance has reached $1.6m from the 1st July 2017.
- If the purchase price of your superannuation pension exceeds $1.6m, the ATO will direct your fund to reduce your interest and you may be subject to excess transfer balance tax. This leaves open the possibility of leaving some of your account in accumulation.
- Non-concessional contributions will be reduced to $100,00 pa from the 1st July 2017 with a three-year bring forward rule, down from $180,000 currently.
- Concessional contributions will be reduced to $25,000 pa
- An extra 15% tax on contributions for individuals with adjusted incomes over $250,000 (down from $300,000 currently).
- Earnings on fund income in transfer to retirement income streams (TRIS) will no longer be tax-free.
It’s not all bad news:
- If you are under age 75, you can claim a deduction for personal superannuation contributions. This was previously only allowed for self-employed individuals, however now you can top up concessional superannuation even if you have wage income from the 1st July 2017. If you are over 65, you will still need to pass the work test.
- Carry forward unused superannuation caps for members with balances less than $500,000. From the 1st July 2018 if you have not fully utilised your concessional contribution caps in previous years, you can top up in later years.
These changes will affect most individuals in different ways, so please get in contact with us so we can give you the advice suited to your circumstance.
Contributed by David Gow