Significant changes to superannuation came into effect on the 1 July 2017. We have outlined the major changes below.

CONCESSIONAL (BEFORE-TAX) SUPERANNUATION CONTRIBUTIONS CAP REDUCED

Concessional contributions cap reduced to $25,000

The annual concessional contributions cap has been reduced to $25,000 (from $30,000 for those aged under 49 at the end of the previous financial year and $35,000 otherwise).  Effective from 1 July 2017.

NON-CONCESSIONAL (AFTER-TAX) CONTRIBUTIONS CAP REDUCED

Non-concessional contributions cap reduced to $100,00

The annual non-concessional contributions cap has been reduced from $180,000 to $100,000.  In addition, criteria for an individual to be eligible for the non-concessional contributions cap has been introduced and other minor amendments to the non-concessional contributions rules have been made.  These changes come into effect from 1 July 2017.

CONCESSIONAL SUPERANNUATION CONTRIBUTIONS TAX THRESHOLD REDUCED (DIVISION 293)

The threshold at which high-income earners pay Division 293 tax on their concessional tax contributions to superannuation has been reduced from $300,000 to $250,000. In addition, criteria for an individual to be eligible for the non-concessional contributions cap has been introduced and other minor amendments to the non-concessional contributions rules have been made.  This comes into effect from 1 July 2017.

INTRODUCTION OF A TRANSFER BALANCE CAP

A $1.6 million cap has been introduced on the amount that can be transferred to super in retirement phase when earnings are tax-free.   This comes into effect from 1 July 2017 and will be indexed in following years. Retired people with retirement phase balances below $1.7 million on 30 June 2017 will have 6 months from 1 July 2017 to bring their balances under $1.6 million.

GREATER DEDUCTIBILITY OF PERSONAL CONTRIBUTIONS

The requirement that an individual must earn less than 10 per cent of their income from employment to be able to deduct a personal contribution to their super to make it a concessional contribution has been removed. This will apply from the 2017-18 income year.

LOW INCOME SUPERANNUATION TAX OFFSET TO REPLACE THE LOW INCOME SUPER CONTRIBUTION

The Low Income Superannuation Tax Offset (LISTO) will replace the Low Income Superannuation Contribution from 1 July 2017. The LISTO refunds up to $500 of the tax paid on concessional super contributions for low-income earners with a taxable income of up to $37,000.

INCREASED ELIGIBILITY FOR TAX OFFSETS FOR SPOUSE CONTRIBUTIONS

This increases the amount of income an individual’s spouse can earn before the individual stops being eligible to a tax offset for contributions made on behalf of their spouse. This will apply from the 2017-18 income year and the recent change sees the income eligibility threshold increase from $13,800 per annum to $40,000 per annum.

CHANGES TO EARNINGS TAX EXEMPTIONS FOR TRANSITION TO RETIREMENT AND OTHER LIFETIME PRODUCTS

The earnings tax exemption has been extended to new lifetime products (including deferred products and group-self annuities). The earnings tax exemption for transition to retirement income streams has been removed. An integrity measure that will apply to self-managed super funds and other small funds has been introduced. These changes will apply from the 2017-18 income year.

ABOLISHING THE ANTI-DETRIMENT RULE

The anti-detriment provision which allows superannuation funds to claim a tax deduction for a portion of the death benefits paid to eligible dependents will be removed from 1 July 2017.

SUPER GUARANTEE RATE INCREASE CHANGES WERE PREVIOUSLY LEGISLATED TO INCREASE ACCORDING TO THE FOLLOWING TIMETABLE

The Super Guarantee contribution rate is set to reach 12% in 2025. Increases from the current rate of 9.50% start 1 July 2021.

Financial year Rate (%)
2015/16 9.50
2016/17 9.50
2017/18 9.50
2018/19 9.50
2019/20 9.50
2020/21 9.50
2021/22 10.00
2022/23 10.50
2023/24 11.00
2024/25 11.50
2025/26 12.00

ALLOWING ‘CATCH-UP’ CONCESSIONAL CONTRIBUTIONS

Individuals whose superannuation balance at the end of the previous financial year is less than $500,000 will be able to carry forward unused concessional cap amounts from the previous five years. This applies to calculating an individual’s concessional contributions cap from the 2019-20 financial year onwards.

Speak to your Superannuation adviser regarding these changes and how they affect your financial position. Contact us to find out more.

This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances.