The end of financial year coming to a close.
As part of the Federal Budget and subsequent announcements, the Government is making significant changes to super contribution rules.
If you are looking to make a top-up contribution into your Superannuation for this financial year, please make sure that your contribution is processed no later than Monday, the 26th June 2017. Don’t leave extra super contributions to the last minute.
The ATO generally takes the view that the super fund needs to receive the contribution by 30 June in order for it to be considered a contribution for this year.
This recent budget announcement has also seen some of the biggest super reforms since July 2007, with superannuation contribution rules and limits set to change from 1 July 2017.
This video by ANZ Technical Services Manager Mark Gleeson highlights the important changes to superannuation. Keeping these in mind, it is important to remember that despite the changes, there are still opportunities you can take advantage of before the financial year ends.
SUMMARY OF THE SUPER CONTRIBUTION CAP CHANGES
Before-Tax (Concessional) Super Contribution Caps
|Concessional Contribution Annual Caps||Current||From July 1 2017|
|Under age 50*||$30,000||$25,000|
|Age 50 and over*||$35,000|
*As at the last day of the financial year
After-Tax (Non-Concessional) Super Contribution Caps
|Non-concessional Contribution Annual Caps||Current||From July 1 2017|
|Three year bring forward*||$540,000||$300,000|
*Under 65 years of age
In addition to the non-concessional contribution cap changes, it is important to note that transition arrangements apply if the bring forward rule is triggered prior to 1 July 2017, as detailed below.
Financial Year Triggered
|From 1 July 2017||
- Important note: – from 1 July 2017, individuals with a total super balance of $1.6 million, or above, will not be able to make any further after-tax contributions. This means the current financial year may be the last opportunity where you can make an after-tax contribution.
Other Changes to be aware of …
- More people may start benefitting from spouse contributions. Currently, an individual making a contribution into their spouse’s super account may be entitled to a maximum tax offset of $540 if certain requirements are met.
|Effective Date||Total income of recipient spouse||Tax offset* available to contributing spouse|
|Up to 30 June 2017||Up to $10,800||Up to $540|
|From 1 July 2017||Up to $37,000||Up to $540|
*Tax offset applies to a maximum contribution of $3,000 p.a.
Changes to co-contribution rules, and thresholds
- As part of the Government’s co-contribution scheme, some may be eligible to receive up to $500 p.a. into their super. The applicable thresholds for eligible members have been updated and are provided below
|Co-contribution thresholds||Up to 30 June 2017||From 1 July 2017|
|Lower income thresholds||$36,021||$36,813|
|Higher income threshold||$51,021||$51, 813|
Eligibility rules to change: In addition to the existing eligibility requirements, for the 2017/18 and later financial years you will no longer be eligible for co-contributions if:
- Your non-concessional contributions exceed the cap for that financial year
- If your total superannuation balance, at 30 June of the previous financial year, equals or exceeds $1,600,000
Introduction of $1,600,000 balance cap on pension accounts
- From 1 July 2017, the Government is introducing a limit to the total amount of funds that can be held in superannuation retirement pension accounts. A cap of $1,600,000 (held in one or more funds) will apply, and affected members who do not withdraw or transfer the excess in time will be forced to do so by the ATO and potentially charged a penalty tax. Details provided below.
|Balance at 30 June 2017||What you need to do||Penalties|
|Under $1,600,000||No action required||None|
|$1,600,000 and over||To avoid tax penalties, members need to act before June 30 2017* and either:
1. Withdraw the excess portions, or
2. Transfer the excess portion back into a super-savings account or Income account – Transition to Retirement
|A tax rate of 15% will apply to notional earnings on the portion over $1,600,000 from 1 July 2017|
*A six-month grace period will apply where the cap is exceeded by less than $100,000, allowing the member until 31 December 2017 to withdraw or transfer the excess portion.
Transition to Retirement (TTR)
Currently, TTR account investment earnings are generally tax free. This will change so that investment earnings will be taxed at up to 15%, the same tax rate applicable to accumulation accounts.
Reduction of the annual high income earners threshold
- Under existing rules an additional 15% tax applies to concessional (before-tax) contributions if a person’s income (including concessional super contributions) exceeds a certain threshold. This threshold will reduce from $300,000 to $250,000.
PLUS more Important Changes:
- Personal contributions to be tax-deductible from 1 July 2017
- Restrictions on non-concessional contributions for superannuation balances in excess of $1,400,000
- Death benefit and anti-detriment payments to cease
- Preservation age change from 1 July 2017
If you would like any more information, or are uncertain as to how these changes may impact you, we strongly encourage you to contact our office on 1300 757 850.
This article is for general information purposes only. It has been prepared without considering your objectives, financial situation or needs. You should, before acting on the information, consider its appropriateness to your circumstances.