January 12, 2017

What do the changes to superannuation mean for you?

Towards the end of 2016, the Australian Government passed legislation to make sweeping changes to the superannuation system. The stated aims of these changes are to make the system fairer and to save the government money. Following is a list of some of the key changes. For more information on how these changes may affect you, contact your financial planner.

Introduction of a $1.6 million superannuation transfer balance cap. From 01 July 2017, there will be a $1.6 million transfer balance cap on the total amount of accumulated super an individual can transfer into the tax-free retirement phase. More details here.

Changes to the taxation of concessional super contributions. From 01 July 2017, the threshold at which high income earners pay additional contributions tax will be lowered from $300,000 to $250,000. Also, the annual cap on concessional (before tax0 super contribution will be reduced to $25,000, from the current $30,000 for those under 49 or $35,000 otherwise.

Annual non-concessional contributions cap will be lowered. The annual non-concessional contributions cap will be lowered to $100,000 from 01 July 2017. Other constraints also apply (see here for details).

The Low Income Superannuation Contribution (LISC) will be replaced by the Low Income Superannuation Tax Offset (LISTO).

Improved access to concessional contributions. From 01 July 2017, all individuals under the age of 65 and those aged 65-74 who meet the work test will be able to claim a tax deduction for personal contributions to eligible super funds, up to the concessional contributions cap.

Allowing catch-up concessional contributions. From 01 July 2018, individuals with a total super balance of less than $500,000 will be able to carry forward any unused concessional cap space (for up to 5 years).

Extending the spouse tax offset. Eligibility for a tax offset of up to $540 for individuals who make super contributions to their spouse’s super fund will be extended to those spouses earning up to $40,000 from the current $10,800.

Tax exemption on earnings in the retirement phase will be extended to products such as deferred lifetime annuities and group self-annuitisation products providing flexibility and choice for retirees.

Integrity of transition to retirement income streams (TRIS) improved. The tax exempt status of income from assets supporting TRIS will be removed and these earnings will now be taxed concessionally at 15%.

The above information is of a general nature and does not take into account individual circumstances. Please see your financial adviser before acting on any of this information.

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