2016 Superannuation Reforms passed both houses
Superannuation legislation proposed end of September 2016 have passed through both houses of parliament today. These make significant changes to the superannuation laws and do differ from the original changes announced in the Federal Budget in May 2016.
The below changes will apply from 1 July 2017 so it might be sensible to for you to start thinking about how your superannuation and retirement planning will be impacted by the changes now and whether you need to change any of your super arrangements.
Changes in the legislation which you might need to consider include:
- The new $1.6 million transfer balance cap, which places a limit on the amount an individual can hold in the tax-free retirement phase from 1 July 2017.
- Note – this includes defined benefit funds in the assessment eg CSS/PSS pensions
- Contributions
- The lower contribution caps for all taxpayers applying from 1 July 2017. The new caps will be:
- Concessional contributions (pre-tax contributions) — $25,000 per year.
- Non-concessional contributions (after-tax contributions) — $100,000 per year
- Revised limit of $300,000 on the bring forward provision of 3 years’ worth of contributions to a single year. However to note:
- If you have triggered but not utilised the whole amount of the $540,000 limit in 2015-2016 or 2016-2017, the balance left to contribute needs to be reviewed carefully as a reduced limit may apply.
- If you have super balances exceeding $1.6 million you will no longer be able to make non-concessional contributions post 1 July 2017.
- The lower contribution caps for all taxpayers applying from 1 July 2017. The new caps will be:
- Reducing the income threshold at which individuals are required to pay an additional 15 per cent contributions tax, from $300,000 per year to $250,000.
- Removing the tax-free treatment of assets that support a transition to retirement income stream.
From 1 July 2018 the following change will apply:
- Individuals with balances of less than $500,000 will be able to ‘carry forward’ unused concessional cap space for up to five years. This will provide greater flexibility for those with broken work patterns.
How can we help?
The above legislative changes will most likely have an impact on your circumstances if you have a superannuation balance close to or over $1.6 million, were planning on making significant contributions to superannuation in the next few years, are a high income earner or have a transition to retirement pension in place now.
If you would like to discuss your particular circumstances in more detail as a result of the above please do not hesitate to contact us to arrange a meeting.
