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Changes to super

Superannuation 2016-17

On 23 November 2016 a number of superannuation changes originally proposed in the 2016-2017 Federal Budget were legislated when the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 passed parliament. The changes are positive overall, improving the equity, efficiency and sustainability of super tax concessions.

The changes include:

Introduction of a transfer balance cap

A $1.6 million cap has been introduced on the amount that can be transferred to super in retirement phase when earnings are tax-free. Additional savings can remain in an accumulation account (where earnings are taxed at 15 per cent) or remain outside super. This comes into effect from 1 July 2017 and will be indexed in following years. Retired people with retirement phase balances below $1.7 million on 30 June 2017 will have 6 months from 1 July 2017 to bring their balances under $1.6 million.

Concessional superannuation contributions cap reduced

The annual concessional contributions cap has been reduced to $25,000 (from $30,000 for those aged under 49 at the end of the previous financial year and $35,000 otherwise). This comes into effect from 1 July 2017.

Concessional superannuation contributions tax threshold reduced

The threshold at which high-income earners pay Division 293 tax on their concessionally taxed contributions to superannuation has been reduced from $300,000 to $250,000. This comes into effect from 1 July 2017.

Non-concessional contributions cap reduced and criteria introduced

The annual non-concessional contributions cap has been reduced from $180,000 to $100,000. In addition, criteria for an individual to be eligible for the non-concessional contributions cap has been introduced and other minor amendments to the non-concessional contributions rules have been made. These changes come into effect from 1 July 2017.

Low Income Superannuation Tax Offset to replace the Low Income Super Contribution

The Low Income Superannuation Tax Offset (LISTO) will replace the Low Income Superannuation Contribution from 1 July 2017. The LISTO refunds up to $500 of the tax paid on concessional super contributions for low-income earners with a taxable income of up to $37,000.

Greater deductibility of personal contributions

The requirement that an individual must earn less than 10 per cent of their income from employment to be able to deduct a personal contribution to their super to make it a concessional contribution has been removed. This will apply from the 2017-18 income year.

Allowing ‘catch-up’ concessional contributions

Individuals whose superannuation balance at the end of the previous financial year is less than $500,000 will be able to carry forward unused concessional cap amounts from the previous five years. This applies to working out an individual’s concessional contributions cap from the 2019-20 financial year onwards.

More tax offsets for spouse contributions

This increases the amount of income an individual’s spouse can earn before the individual stops being eligible to a tax offset for contributions made on behalf of their spouse. This will apply from the 2017-18 income year.

Changes to earnings tax exemptions

The earnings tax exemption has been extended to new lifetime products (including deferred products and group-self annuities). The earnings tax exemption for transition to retirement income streams has been removed. An integrity measure that will apply to self-managed super funds and other small funds has been introduced. These changes will apply from the 2017-18 income year.

Abolishing the anti-detriment rule

The anti-detriment provision which allows superannuation funds to claim a tax deduction for a portion of the death benefits paid to eligible dependants will be removed from 1 July 2017.

Super Guarantee rate increase changes were previously legislated to increase according to the following timetable

The Super Guarantee contribution rate is set to reach 12% in 2025

Financial yearRate
2015/16 9.5%
2016/17 9.5%
2017/18 9.5%
2018/19 9.5%
2019/20 9.5%
2020/21 9.5%
2021/22 10.0%
2022/23 10.5%
2023/24 11.0%
2024/25 11.5%
2025/26 12.0%

Click to see the proposed changes which have not yet been legislated.

Click to see pension changes.