Changes to super
From July 1st 2017 a number of superannuation changes originally proposed in the 2016-2017 Federal Budget will take place. 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
Click to see the proposed changes which have not yet been legislated.
Click to see pension changes.