As you may know the Government debated at length various “reforms” to Superannuation and there have been significant changes to the law. Some of the key changes include:
- Changes to the amount of concessional contributions (tax deductible contributions), reduced to $25,000 for all taxpayers from 1 July 2017.
The maximum concessional contributions you can make for the year ended 30 June 2017are $30,000 if aged under 49 on 30 June 2016 and $35,000 if you are aged over 49 on 30 June 2016.
- Changes to the amount of non-concessional contributions (after tax contributions), reduced to $100,000.
The concessional contribution cap for the year ended 30 June 2017 is $180,000.
If aged 64 or under on 1 July 2016 you are entitled to the 3 year bring forward rule making the total non-concessional contributions that you may be eligible to contribute prior to 30 June $540,000. There will be a transitionally phased reduction of the bring forward rule post 1 July 2017.
- Limiting the amount a member can have in a tax exempt pension account to $1,600,000. This is based on the market value of pension assets at 1 July 2017, in all superannuation funds relating to you.
If your pension assets (note a TRIS is no longer considered a pension from 1 July 2017) exceed $1,600,000 you have the option of rolling the excess back to accumulation or taking a lump sum payment.
Please note the option to reset cost bases and obtain CGT relief exists for assets rolled out of pension on 1 July 2017. This resetting of cost bases is optional and should be considered on a case by case basis.
You should also consider the impact of this on your estate planning (e.g. reversionary beneficiaries).
- Effectively making redundant transition to retirement pensions (aka: Transition to Retirement Income Stream – TRIS), previously these were tax free, from 1 July 2017 will be taxed at 15% (Capital Gains Tax may be eligible for a 1/3rd reduction if the asset is owned for 12 months or more, reducing the tax to 10%) .
Given the TRIS will be taxed, similar to the accumulation phase of superannuation from 1 July 2017, you may wish to consider:
- whether you wish to continue with a TRIS based pension,
- changing the pension type to an account based pension (note certain hurdles must be passed to be eligible for this change in pension type); or
- cease the pension.
- Decreasing the income threshold for 30% contributions tax to $250,000. Currently the threshold is $300,000. Please note an adjusted assessable income is used to calculate both the $250,000 and the $300,000 amounts.
- Allowing the ability for taxpayers with employer supported superannuation to claim personal superannuation contributions i.e. the removal of the 10% rule.
These changes all apply from 1 July 2017, however as shown by the above points it is of upmost importance that a number of decisions are made this financial year.
The Directors at D J Grewar & Co have identified a number of clients that they feel will be impacted by these changes and will be making contact them with them prior to 19 May 2017. If you feel the above changes will impact you and you haven’t received a phone call by 19 May, please contact our office to discuss.
Should you have any queries please contact our office.
Any information I provided to you in this letter is purely factual in nature and does not take into account your personal objectives, situation or needs. The information is objectively ascertainable and is not intended to imply any recommendation or opinion about a financial product. This does not constitute financial product advice under the Corporations Act 2001 (Cth). It is recommended that you obtain financial product advice before making any decision on a financial product such as a decision to purchase or invest in a financial product. Please contact us if you would like to obtain financial product advice.”