1. Reduction in Concessional Contribution Caps
Effective Date: 1 July 2017
The Concessional Contribution (CC) cap will reduce to $25,000 per annum for all individuals regardless of their age. The Concessional cap will be indexed in line with AWOTE in $2,500 increments.
For those who were aged under 49 on 30 June 2016, the limit will remain $30,000 and for those over the age of 49 on that date the limit will remain $35,000 for the 2016/17 financial year, providing contributions are received by your superannuation fund before 1 July 2017.
Please note that your current Super Guarantee (9.5%) contributions are included in the CC cap.
Clients with sufficient cashflow should use the opportunity to maximise their Concessional Contributions before the 1 July 2017.
2. Changes to Non-Concessional Contribution Caps
Effective Date: 1 July 2017
The Non-Concessional Contribution (NCC) cap will reduce to $100,000 per annum from the current level of $180,000. It is important to note that individuals are not able to make NCC’s if their total superannuation balance is $1.6 million or above from 1 July 2017. Eligible individuals will be able to bring forward up to three years of contributions totalling $300,000. Transitional measures will apply to the carry forward rule.
Clients who currently have sufficient capital available could maximise their current unused NCC. Clients are still able to utilise the current carry forward rules and contribute up to a maximum of $540,000 before 1 July 2017. If your superannuation balance is above $1.6 million, consider maximising your NCC before 30 June 2017.
3. Changes to Personal Deductible Contributions
Effective Date: 1 July 2017
Individuals who are under the age of 75 and previously did not meet the 10% rule, will now be eligible to make Personal Contributions for which they can claim a tax deduction. The 10% rule will no longer apply as of the 1 July 2017. This will enable people in a range of situations to make personal deductible contributions where it is currently not possible. (Those aged between 65 to 75 will still need to meet the work test before making a concessional contribution).
Examples of those now eligible include those who:
- Are employed and receive SG contributions, that are within their CC cap, but their employer does not offer a salary sacrifice arrangement;
- Have switched from being a self-employed contractor to an employee during the year and fail to meet the current 10% rule; or
- Are Australian residents for tax purposes, who are working overseas for a foreign employer and their employer can’t or won’t contribute to a super fund.
4. Catch-up Concessional Contributions
Effective Date: 1 July 2018
Clients with super balances less than $500,000 will be able to access a higher annual concessional contributions cap and contribute their remaining unused Concessional Contribution (CC) cap on a rolling basis for a period of 5 years. Only unused amounts accrued from 1 July 2018 can be carried forward. If a client has only contributed $20,000 as a CC then they can carry forward the remaining $5,000 to the next year cap.
An opportunity exists for those clients who intend to sell a CGT asset, in the future, where they can accumulate the amount of unused CCs over the rolling 5 year period. They can make a lump sum unused CC to offset the CGT liability on the sale of an asset by making a personal deductible contribution.
5. Changes to Transition to Retirement Income Streams
Effective Date: 1 July 2017
Earnings and capital gains from investments held in a Transition to Retirement Income Stream will no longer be exempt and will be taxed at 15% and 10% respectably. These changes will apply to existing and new accounts irrespective of the commencement date for the TRIS. Clients will also no longer be allowed to treat certain super income stream payments as a lump sum for tax purposes.
This particular law will have profound impact to clients aged less than 60. This is because they will also pay tax on income payments, thereby negating the tax benefits for certain income earners. CGT relief is available for super funds for capital gains made on the transfer from pension phase before 1 July 2017.
6. Introduction of the Transfer Balance Cap
Effective Date: 1 July 2017
The total amount of super monies that can be transferred into a pension account will be capped at $1.6 million. The cap will be indexed in $100,000 increments in line with CPI.
A decision will need to be made with clients who have super balances in excess of the $1.6 million cap. Clients with balances with more than the transfer balance cap on 1 July 2017 will need to either:
- Commute the excess balance held in the pension phase back into the accumulation phase; or
- Withdraw the excess amount from their entire super fund.
CGT relief will be provided to all complying super funds to adhere with the transfer balance cap rules. The CGT relief will enable clients to reset the cost base of any investment asset commuted back into the accumulation phase before 1 July 2017 to comply with the transfer balance cap.
7. Abolishing of the Anti-Detriment Payments
Effective Date: 1 July 2017
Anti-detriment payments will be abolished for clients who pass away after 1 July 2017. Where clients pass away before this date, an anti-detriment payment may still be made where the super death benefit is paid before 1 July 2019.
