Superannuation from 1 July 2017 – The New Frontier

Created on July 1, 2017 8:15 am

Happy New Financial Year! With 1 July 2017 marking the start of many of the super reform changes, here is an overview of the new rules:

 

Transfer Balance Cap (“TBC”) for Retirement Phase Accounts

  • $1.6m transfer cap balance now limits the amount held in pension phase and receiving tax-free earnings
  • if you exceed your TBC and do not take steps to rectify this immediately then Excess Transfer Balance Tax may apply
  • different rules apply to individuals in receipt of defined benefit income streams

 

Reduced Contribution Caps – Concessional and Non-concessional

  • concessional cap is $25,000 for everyone regardless of their age
  • non-concessional cap is $100,000 per year with bring forward arrangements available
  • depending on whether an individual’s total superannuation balance is greater than or equal to the general TBC of $1.6 million at the end of 30 June 2017 and/or their non-concessional contribution history for the past two years (2015/16 and 2016/17), will impact their 2017/18 annual cap and bring forward transitional non-concessional contribution cap

 

Personal super deductions of up to $25,000 will be available to most individuals < 75 years old as the 10% test has been removed

  • work test must still be met for those aged 65 to 74 years old
  • documentation must still be completed in writing and lodged on time to ensure you are eligible to claim the deduction

 

Restrictions on accessing Transition to Retirement (“TTR”) pensions

  • the earnings on assets supporting a TTR will no longer be tax-free and will be taxed at 15%, regardless of their commencement date
  • payments from a TTR can no longer be classified as lump sum payments

 

Transitional CGT Relief

  • transitional CGT relief and cost base reset election is available to fund members where they exceed the $1.6m transfer balance cap and reallocate benefits from retirement phase to accumulation phase, or if they have lost their tax exemption on earnings supporting TTRs
  • applicable for assets held on or after 9 November 2016 to 30 June 2017
  • special rules apply if fund had segregated assets as at 9 November 2016
  • for CGT relief to be available, the fund’s 2017 income tax return must be lodged on time

 

Increase in the Spouse Tax Offset Threshold

  • if the total of your spouse’s assessable income, total reportable fringe benefits and reportable employer super contributions is under $40,000 (increased from $13,800 in 2016/17) and all other eligibility criteria is met, then a maximum $540 tax offset may be available

These new rules have changed the way in which superannuation and in particular SMSFs will be managed, especially with the introduction of the TBC rules.

 

As such, it is imperative to notify your administrator about changes in your personal circumstances (eg. change in jobs and retirement) as this can impact your accessibility to your superannuation and eligibility to make contributions.