These changes are expected to become effective from 1 July 2017. The changes will affect us all; the largest affect will be on those who are retiring in the next 10 year.
The legislation has passed through parliament giving members and super funds some certainty over the treatment of their super – at least in the short term.
The new measures include:
- Low Income Super Tax Offset (or LISTO) to provide a tax refund of up to $500 a year if you earn less than $37,000.
- A $1.6m transfer balance cap to limit how much you can transfer from your super account into a tax free pension account.
- Changes to before-tax super contributions that can be taxed concession ally – annual cap reduced to $25,000;
- Cap for high income earners reduced from $300,000to $250,000 at which level you will pay additional tax.
- The ability to make ‘catch up’ concessional contributions if you have a super balance below $500,000. However these changes will not start until 01/07/2018.
In addition to the above the government has also previously changes the non-concessional contributions rules.
In the 2016 budget the government proposed a $500,000 lifetime non-concessional cap. To replace the $180,000 per year or $540,000 in a three years period non-concessional cap.
This will now be replaced by a new measure to reduce the existing annual non-concessional contributions cap from $180,000 per year to $100,000 per year. Individuals aged under 65 will continue to be able to ‘bring forward’ three years’ worth of non-concessional contributions in recognition of the fact that such contributions are often made in lump sums.
In addition individuals with a superannuation balance of more than $1.6 million will no longer be eligible to make non-concessional (after tax) contributions from 1 July 2017. This limit will be tied and indexed to the transfer balance cap.
These measures mean that with their annual concessional contributions, Australians will be able to contribute $125,000 each year and, if taking advantage of the non-concessional ‘bring forward’, up to $325,000 in any one year until such time as they reach $1.6 million.
Individuals aged 65 to 74 who satisfy the work test will still be able to make additional contributions to superannuation. This will encourage individuals to remain engaged with the workforce which is of benefit to the economy more generally.
If you would like more information on how this will directly affect your personal situation give us a call on 07 47714577 for a free initial meeting.