From 1 July 2017 superannuation changes will commence to improve the sustainability, flexibility and integrity of Australia’s super system. The changes are categorised by the situation they apply to.
- Change to Tax offset for spouse contribution– From 1 July 2017, the spouse income threshold will increase, meaning more people will be eligible to claim the tax offset. You will be able to claim the maximum tax offset of $540 if, you contribute to the eligible super fund of your spouse and your spouse’s income is $37,000. The tax offset amount will gradually reduce for income above this amount and completely phases out when your spouse’s income reaches $40,000.
- Changes to Personal super contributions deductions– In 2016–17, an individual can claim a deduction for personal super contributions where they meet certain conditions. One of these conditions is that less than 10% of their income is from salary and wages. This is known as the 10% maximum earnings condition. From 1 July 2017, the 10% maximum earnings condition will be removed. This means most people under 75 years old will be able to claim a tax deduction for personal super contributions. If you are eligible and want to claim a tax deduction, you need to complete a Notice of intent to claim a deduction form and send it to your fund within the required timeframe.
- Changes to non-concessional contributions cap– Non-concessional (after-tax) contributions include: personal contributions for which you do not claim an income tax deduction, and spouse contributions. From 1 July 2017, the annual non-concessional contribution cap will be reduced from $180,000 to $100,000 per year. This will remain available to individuals aged between 65 and 74 years old if they meet the work test. From 1 July 2017, your non-concessional cap will be nil for a financial year if you have a total superannuation balance greater than or equal to the general transfer balance cap ($1.6 million in 2017–18) at the end of 30 June of the previous financial year. In this case, if you make non-concessional contributions in that year, they will be excess non-concessional contributions.
- Changes to concessional contribution cap– As concessional contributions are paid before tax is applied, it means that your super fund pays tax on the contributions at 15%. From 1 July 2017, the concessional contributions cap is $25,000 for everyone. Previously, it was $35,000 for people 49 years and older at the end of the previous financial year and $30,000 for everyone else. The new cap will be indexed in line with average weekly ordinary time earnings (AWOTE), rounded down to the nearest $2,500.
- Transfer Balance Cap– From 1 July 2017, there is a limit on how much of your super you can transfer from your accumulation super account(s) to tax-free ‘retirement phase’ account(s) to receive your pension income. This limit is known as the ‘transfer balance cap’. The transfer balance cap will start at $1.6 million, and will be indexed in line with the consumer price index (CPI), rounded down to the nearest $100,000. And this cap doesn’t just include new pensions. Even if you’re already drawing a pension as an income stream, before 30 June you’ll need to make sure your total balance in the tax-exempt pension phase isn’t over $1.6 million. If it is, you’ll have to either withdraw or move any excess amount back into the accumulation phase of your super, where its earnings will be taxed at 15%. But if you don’t do it in time, you’ll have to pay a tax penalty and the ATO will make you move the excess anyway. it’s important to get guidance before 30 June if you think you may be over or getting close to this cap.
- Change to transition– to -retirement Income streams– From 1 July 2017, the government will remove the tax-exempt status of earnings from assets that support a TRIS. Earnings from assets supporting a TRIS will be taxed at 15% regardless of the date the TRIS commenced.
- Effect on your Estate Planning– if you make any changes to your super plan it may affect to your Estate Planning as well. If you tried to stay under the $1.6 million transfer balance cap, then you may need to plan about your assets after you pass away.
The current super reforms are complex and will affect different people in different ways. Before you make any decisions about your financial planning, talk to us. We will guide you to make the right decision about your money.
For further assistance, please contact Taxplanners on 1300 000 TAX (1300 000 829), 03 9600 0143 (10 Lines).
You can also visit our office for assistance –
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