The Government has implemented significant superannuation changes that commenced from 1 July 2017 and there are also significant changes where you have more than $1.6 Million in superannuation. The new rules are summarised below.
New contribution rules from 1 July 2017
|New rules (from 1 July 2017)||Previous rules (up to 30 June 2017)
|Concessional (tax deductible) contributions limited to $25,000 per year.||Down from $30,000 for under 50’s and $35,000 for over 50’s.
|The addition of a rolling 5-year catch-up for concessional contributions for those with a balance of less than $500,000.||No catch-up opportunity.
|Personal concessional contributions able to be made by anyone (subject to aged based tests).||Only people who had less than 10% of their total assessable income as salary and wages could make a personal concessional contribution
|Non-concessional (after tax) contributions limited to $100,000 per year (or $300,000 over 3 years if under 65) provided you have less than $1.6 million in super and under 65 (or meeting the work test from age 65 to 74). No further non-concessional contributions permitted if have more than $1.6 million in superannuation.||Down from $180,000 per year (or $540,000 over 3 years if under 65) regardless of balance.
|Tax on contributions increased to 30% (rather than 15%) where annual income is more than $250,000.||Down from $300,000.
New retirement / pension rules from 1 July 2017
|New retirement / pension rules |
(from 1 July 2017)
|Previous retirement / pension rules
(up to 30 June 2017)
|Limit of $1.6 million that can be used to start a pension or hold in retirement phase (reducing the tax rate on earnings to 0%).||Previously no limit.
|Earnings on funds supporting a transition to retirement income stream (TRIS) to be taxed at 15%||Previously the earnings on funds supporting a TRIS were tax exempt.
Contributing the proceeds of downsizing to superannuation
From 1 July 2018, individuals aged 65 or over will be able to make a contribution to superannuation of up to $300,000 from the proceeds of selling their home.
The key points:
- Starts from 1 July 2018.
- Contributions do not count towards the concessional or non-concessional contribution caps.
- Do not need to meet the existing maximum age, or work test.
- Can still make the contribution if have more than $1.6 in super.
- Home sold must have been owned by the individual for at least ten years and been their principal residence.
What are the areas that people should be considering / reviewing:
- Review amount of concessional contributions to make in 2017/18. This is the first year a personal taxable contribution can be made (& not have to meet the “self-employed” test).
- Review your available non-concessional caps given the changes.
- If in retirement phase / pension mode consider impact of changes if you are still working and under age 65.
- If in retirement phase / pension mode at 30 June 2017 and impacted by the superannuation changes make sure you have complied with the new rules. Also check to see if it is worth applying for Capital Gains Tax relief (by the required date).
- Consider impact of taking excess over $1.6 Million cap out of the Fund.
- Consider your spouse’s current superannuation balance. A review should be done of each member’s spouses balance and consideration given to the ability to “even up” superannuation balances.
- Review your will / estate planning position given the changes to superannuation.
The new super rules are very complicated – the decisions you make now can have a significant impact to future tax implications of your superannuation. To put yourself in the best possible position, arrange for your advisor to review your personal situation.