New superannuation changes and how they affect you

Posted on June 24, 2017 by ATB Chartered Accountants

New superannuation changes

New superannuation changes came into effect on the July 1. These changes affect super contributions and the taxation requirements surrounding this. At ATB, we know that superannuation is important in securing your financial future, and so it is important to us that you are aware of all changes, and how they will impact you.

Who do these changes affect

Most simply, the proposed changes will affect low income earners, high income earners, self-employed individuals, those who wish to make additional contributions, and retirees or people approaching retirement.

Low income earners

Low income earners, part-time workers or individuals without constant income streams tend to struggle with saving for retirement. If this is you changes to superannuation tax offsets, with more flexible super contribution rules may well help.

Spouse super contributions

If you make a contribution to your spouse’s super when they earn less than $37,000 p.a., you will be eligible to claim a tax offset equal to 18% of the contributions made for up to $540. If they earn up to $40,000, you might still be entitled to a partial offset.

Low income super tax offset (LISTO)

Taxpayers who earn up to $37,000 p.a. will receive an additional super contribution from the government, equal to 15% of super contributions for up to $500. Essentially, the government will contribute $0.50 for every $1.00 contribution you make.

Carry cap forward

A new concessional contributions rule allows tax contributions to be carried forward. For taxpayers with irregular work patterns, part-time roles or who have been out of the workforce for a period of time, this allows the unused portion of your concessional cap to be rolled over for up to 5 years, meaning you can make additional contributions.

High income earners

Taxpayers who’s combined income and super contributions exceed $250,000 will have to pay additional tax on the excess. This falls under Division 293 tax, and equates to an additional 15% tax. This has been reduced from the initial $300,000 threshold.

People who want to make additional contributions

Tax deductions for personal contributions

Self-employed individuals and people who earn less than 10% of their income from wages/salary can claim tax deductions on any contribution they make. These contributions will be treated as a concessional contribution. This 10% rule has since been removed to make it easier for additional contributions to be made.

Before tax super contributions (concessional)

The concessional contributions cap has been lowered to $25,000. Despite this reduction, you will be able to carry forward any unused concessional contributions cap on a rolling 5 year basis.

After tax super contributions (non-concessional)

The non-concessional contributions cap has been reduced from $180,000 to $100,000 p.a. One-off contributions can still be made by bringing forward up to 3 times the cap if you are under 65, and have not reached the new transfer balance cap. The full benefit may not apply if your total super balance is close to the balance transfer cap.

Government co-contributions

As previously mentioned, low income earners may be eligible to receive a government co-contribution payment, calculated at $0.50 for every $1.00 contributed, with a maximum of $500. You must have a total superannuation balance at the end of the previous financial year of less than the transfer balance cap, and not exceed this.

Retirees or those looking to retire

There have been new restrictions put in place surrounding the calculation of the death benefit payout, transition to retirement (TTR) pensions and how much you can transfer into a tax-free super pension.

Transition to retirement (TTR) pensions

Earnings of a TTR pension are now taxed at up to 15%. This is the same as they would be in a super accumulation account. The earnings of ordinary retirement pensions are still tax free.

Super transfer balance cap

A limit has been introduced on how much super you can transfer  to a tax-free account-based pension. This cap is set at $1.6 million, but will be indexed by CPI, rounded down to the nearest $100,000. Only the unused portion of your cap will be indexed.

Investment earnings will not affect your transfer balance cap. TTR pensions also will not affect the cap, and there is no limit on how much you can have in your accumulation super account. Account-based pensions that were started before 1 July 2017 will be counted towards the cap on 1 July 2017.

If you exceed the transfer balance cap, you may have to remove the excess funds and pay tax on the earnings related to the excess.

Super anti-detriment payment

The super anti-detriment payment is no longer available as part of a super death benefit payment. Super funds will still be able to make an anti-detriment payment until 30 June 2019 for members who died before 1 July 2017.

How we can help you

As you can see from the above Super  and SMSF management are complicated!

As proactive business accountants and wealth advisors, we focus on your business and personal needs in the present, looking forward and not in the rear-view mirror. We stay on top of changes and make sure you benefit from them… while complying fully with the complex rules.

Contact us to chat about any concerns you have about your Super fund