Government releases more superannuation legislation
New additional proposed changes to superannuation legislation were released at the end of September as the Government amends and improves the changes they announced in the 2016 Federal Budget, prior to the election.
If the legislation passes, these new amendments, will take effect from 1 July 2017. As there is now more certainty about the likely final legislation, self-managed super fund (SMSF) trustees should start thinking about if they will need to re-work their super planning, should these changes become law. The alterations to legislation may mean trustees will need to re-consider elements such as investments, pension, contributions and estate planning strategies.
There are several large policy changes that remain the same since the Federal Budget announcement, and are likely to be legislated.
It’s recommended that you start talking to your SMSF adviser today to be prepared and to proactively plan for these changes.
- A $1.6 million limit on super pensions for transfer balances. This places a cap on what an individual can hold tax-free in retirement.
- Removal of the tax exemption on the income derived from transition-to-retirement pensions.
- Reducing the annual before-tax contributions cap to $25,000.
Other changes to consider from the September announcement:
- The controversial $500,000 lifetime cap on after-tax contributions has been replaced with a $100,000 per year cap.
- If your super balance is below $500,000, there will be some flexibility to ‘carry forward’ any unused concessional cap over a five year period.
- Individuals with an income of $37,000 and under will continue to be entitled to the Low Income Super Contribution (LISC) refund which is paid on concessional contributions. This will be renamed to the Low Income Superannuation Tax Offset (LISTO) and continued indefinitely from 1 July 2017.
- The cap above which higher income earners will incur an additional 15% tax on taxable contributions is to be reduced to incomes of $250,000 or more.
- After 20 years, the income threshold for the spouse tax offset will increase from $10,800 to $37,000. This means a spouse’s contribution will be eligible to claim an 18% offset, up to $540.
- The Government has introduced an equity measure so employees can make personal superannuation contributions and claim these as a tax deduction, subject to meeting other conditions.
These changes will affect most Australians and how their self-managed super funds work.
You will need to seriously consider your strategy should you; have a super balance close to or over $1.6 million, are a high income earner, have a transition to retirement pension or if you are planning on making significant contributions to your super over the next several years.
We know your circumstance is not the same as others, so please call one of our super specialists to talk about your unique situation and how these changes may impact your retirement.