On 23 November 2016, you may have missed the big announcement. Parliament passed the Super measures announced in the 2016 Federal Budget. Sound boring? Well there not boring and they could affect you, your parents or a loved one, so read on. The changes are aimed at improving the fairness, sustainability, flexibility and integrity of the superannuation system – it’s serious stuff.

The table below outlined the new laws. Read through them and please, if they don’t make sense or you would like to know how these may affect you, feel free to call me, Brodie Martin, Financial Adviser at Profusion Planning, 08 9316 3050 Or, pass my details on.

 

Point What? What does that mean?
1 $1.6 M transfer balance cap From 1 July 2017 a $1.6M transfer balance cap will be imposed on the amount that can be transferred to the Pension phase.

 

Defined benefit accounts that have no account balance will have additional tax applied on defined benefit pension payments in excess of $100,000.

2 Taxation imposed where transfer balance cap is exceeded Where the cap is exceeded the member’s, fund will be instructed to commute the excess to an accumulation account for the individual or to the individual as a lump sum benefit payment.

 

The excess will include a notional earnings on the excess and the individual will be liable for tax on this.

 

The excess transfer balance tax is set as follows:

2017/18 – 15%

2018/19 onwards – 15% for first breach & 30% for all subsequent breaches.

 

3 Concessional Contribution Cap From 1 July 2017, the concessional contribution cap will be reduced for everyone to $25,000.

 

From 1 July 2017, members of constitutionally protected funds will have their salary sacrifice as 4counting towards the cap, but exempts any contributions above the cap from excess contributions tax.

4 Division 293 tax From 1 July 2017, the Division 293 tax threshold will reduce from $300,000 to $250,000.
5 Carry Forward Concessional Cap From 1 July 2018, the used amount of a person’s concessional contribution cap can be carried forward for an used in any of the following 5 years provided the person had a super balance of less than $500,000 on 30 June of the financial year immediately preceding the year they wish to use the carry forward amount.
6 Deducting personal contributions From 1 July 2017, the 10% test will be moved when determining who can make a personal deductible contribution.

 

The measure will not apply to members of untaxed superannuation funds nor to defined benefit schemes that elect not to be subject to the measure.

7 Non-Concessional Contribution (NCC) Cap From 1 July 2017, the non-concessional cap will be reduced to $100,000 and the ability to make NCC will only be available to those who have a super balance below $1.6 M at the prior 30 June.

 

When the bring forward is triggered from 1 July 2017, the amount of the bring forward (the bring forward cap) and the bring forward period will depend on the difference between the general transfer balance cap (i.e. $1,600,000 as at 1 July 2017) and the member’s total superannuation balance at that time (first year cap space).

8 Low Income Tax Offset From 1 July 2017, clients with an adjusted taxable income of less than $37,000 will effectively receive a refund into their super of up to $500 of the tax paid on their concessional contributions.
9 Tax Offset for Spouse Contributions From 1 July 2017, the total spouse income threshold will be increased from $13,800 to $40,000. The maximum offset will remain at $540 and be payable where a spouse’s income is no more than $37,000.

 

No offsets will be allowable where the receiving spouse has exceeded their non-concessional cap for the relevant year.

10 Innovative income streams and integrity The tax exempt status will be extended to new lifetime products such as deferred products and group self-annuities. This measure seeks to address longevity risk worn by retirees.

 

The tax exemption on the earnings of transition to retirement income streams will be removed from 1 July 2017.

 

SMSF’s and small APRA regulated funds will be prevented from using the segregated methods to calculate earnings tax exemptions where their total super balance exceeds the $1.6 million transfer balance cap.

11 Anti-detriment Provisions From 1 July 2017, superannuation funds will no longer be able to claim a tax deduction for a portion of the death benefit paid to eligible dependants.
12 Administrative streamlining Amendments will be made simpler and consolidate the release authority process where excess contributions (either concessional or non-concessional) are withdrawn from superannuation.

For further information about how these changes may affect you, please feel free to call me, Brodie Martin, Financial Adviser at Profusion Planning on 08 9316 3050, or pass my details on to others.