- New Non-Concessional Contribution Cap
A lifetime non-concessional contributions cap of $500,000 will be introduced. The cap will take into account all non-concessional contributions made on or after 1 July 2007. Any non-concessional contributions made before the commencement date (7.30pm on 3 May 2016) are not affected. If you have paid more than $500,000 of non-concessional contributions to your superfund since 1 July 2007, you should consider ceasing all future non-concessional contributions. The lifetime non-concessional cap will replace the existing annual caps which allow annual non-concessional contributions of up to $180,000 per year (or $540,000 every three years for individuals aged under 65).
From 1 July 2017
- New Concessional Contribution Cap
Maximum deductible super contributions will be restricted to $25,000.
- New Concessional Contribution Rules
Individuals with a superannuation balance less than $500,000 will be allowed to make additional concessional contributions where they have not reached their concessional contributions cap in previous years. Amounts are carried forward on a rolling basis for a period of five consecutive years, and only unused amounts accrued from 1 July 2017 can be carried forward. For example, if my superannuation balance is less than $500,000 then if in year 1, I make a Super contribution of $15,000 (that is less than the $25k cap), in year 2, I can use the super cap of $25,000 plus the unused cap of $10,000 from year 1 ($25,000 less $15,000) to contribute a total of $35,000.
- Pension Phase
A cap of $1.6m on the total amount of accumulated superannuation an individual can transfer into the tax-free retirement phase will be introduced. Subsequent earnings on these balances will not be restricted. This will limit the tax-free benefits of retirement phase super fund balances.
Where an individual accumulates superannuation amounts in excess of $1.6m, they will be able to maintain this excess amount in an accumulation phase account (where earnings will be taxed at the concessional rate of 15%). Members already in the retirement phase with balances above $1.6m will be required to reduce their retirement account balance to $1.6m by 1 July 2017. Excess balances for these members may be converted to superannuation accumulation phase accounts and the earnings will be taxed at 15%.
Commensurate treatment for members of defined benefits schemes will be achieved through changes to the tax arrangements for pension amounts over $100,000 from 1 July 2017. How this will happen is still unclear as further consultation is planned.
- Work Test from 65yrs to 75yrs Removed
The current restrictions on people aged 65 to 74 from making superannuation contributions for their retirement will be removed from 1 July 2017. People under the age of 75 will no longer have to satisfy a work test and will be able to receive contributions from their spouse.
- 90/10 Rule Removed
All individuals up to age 75 will be allowed to claim an income tax deduction for personal superannuation contributions.
This effectively allows all individuals, regardless of their employment circumstances, to make concessional superannuation contributions up to the concessional cap. Individuals who are partially self-employed and partially wage and salary earners, and individuals whose employers do not offer salary sacrifice arrangements will benefit from these changed arrangements.
- Low Income Superannuation Tax Credit
A low income superannuation tax offset (LISTO) will be introduced to reduce tax on superannuation contributions for low income earners. The measure will effectively avoid the situation in which low income earners would pay more tax on savings placed into superannuation than on income earned outside of superannuation
- Low Income Spouse Contributions
The income threshold for the receiving spouse (whether married or de facto) of the low income spouse tax offset will be increased from $10,800 to $37,000 from 1 July 2017. The low income spouse tax offset provides up to $540 per annum for the contributing spouse
- Tax Free TRIS Removed
The tax exemption on earnings of assets supporting Transition to Retirement Income Streams (TRISs) will be removed from 1 July 2017. TRIS Pensions and the income from assets supporting them will be taxed from 56 years to 60 years. It is our understanding TRIS pensions paid after age 60 years will continue to be tax free to the member but the income from the assets supporting the TRIS will be subject to tax at 15% in the super fund until the earlier of retirement or age 65.