• Recent Superannuation Changes

On 29 November 2016 the Superannuation changes announced at Budget received Royal Assent. These are referred to as the “Fair and Sustainable Superannuation Bill 2016”.

Some of the significant changes are outlined below and come into effect from 1 July 2017 unless stated otherwise.

Introduction of a transfer balance cap $1,600,000

A $1,600,000 million transfer cap has been introduced which limits the amount that may be treated as tax free or in pension phase within the fund. Any amount that exceeds the $1,600,000 million cap may remain within the fund, however these amounts must be transferred into accumulation phase which will be taxed at 15%, or may be withdrawn from the fund. The $1,600,000 cap will be indexed in following years.

Members in retirement phase with a balance below $1.7 million on 30 June 2017 will have 6 months from 1 July 2017 to bring their pension balances under $1,600,00 million.

The transfer balance cap measure includes a transitional Capital Gains Tax relief via a cost base reset for those in pension mode. This relief is designed to ensure that only future capital growth is assessable. The cost base reset is very complicated and requires careful consideration prior to 1 July 2017 as this election is a one off irrevocable election and some members may not be better off by simply resetting the cost base for all of their assets.

Transition to Retirement Income Stream pensions will no longer be tax exempt within a superfund and all such balances will be assessed on their income and capital gains at 15%.

The annual concessional contributions cap has been reduced to $25,000 pa (currently $30,000 pa for those aged under 49 at the end of the previous financial year and $35,000 pa for those over the age of 49).

Concessional superannuation contributions cap reduced

The annual concessional contributions cap has been reduced to $25,000 pa (currently $30,000 pa for those aged under 49 at the end of the previous financial year and $35,000 pa for those over the age of 49). 

Non Concessional Superannuation Contribution cap reduced

The annual non concessional contribution cap has been reduced to $100,000 pa (currently at $180,000 pa) or $300,000 (currently $540,000) bring forward over three years, for those under the age of 65, with a members balance under $1,600,000. Transitional arrangements will apply to those who have previously triggered the bring forward rules over the last two years, and/or have a members balance close to $1,600,000.

Division 293 Tax – Additional 15% tax on Concessional Contributions.

The threshold at which high-income earners pay Division 293 tax on their concession contributions has been reduced from $300,000 to $250,000. Those who are affected will pay an additional tax of 15% on the concessional contributions they have made.

‘Catch-up’ of concessional contributions from 1 July 2018.

Permits a catch up of any unused concessional contributions cap, over a five year rolling basis. Special conditions apply with regard to a member’s balance which must be less than $500,000 at the end of the previous financial year. It is as a “use” or “lose it” approach and aims to benefit those with interrupted work patterns, part time workers and return to work parents.

DISCLAIMER

The information above is purely factual in nature and does not take into account your personal objectives situation or needs. The information is objectively ascertainable and therefore does not constitute financial product advice.  If you require personal advice you should consult an appropriately licensed or authorised financial adviser. The information in this document been prepared by Grant Thornton Wealth Advisory Services Pty Ltd ABN 61 007 073 305 AFSL 234500.