Parliament in record time passed the changes to superannuation that were announced in May and September. They all start from 1 July 2017.
At present the size of a member’s benefit when in pension phase has no relevance. However from 1 July 2017, there is an initial limit of $1.6 million.
Any amount above this will be required to go back to the accumulation phase where the tax on the income generated becomes 15% as opposed to zero%. Currently it makes no difference in whose name the funds were for a couple. Now there is a limit of $1.6mper person so it does matter. Of course if you have less than this amount then you have no worries.
The limit on concessional (tax- deductible) contributions has been lowered to $25,000 no matter your age up to 65. The limit on non-concessional contributions has been lowered to $100,000 per year. The bring forward rule still applies. For the 2016/17 year the maximum is $540,000
That is if you have not made non-concessional contributions in the past two years. However, there is also a limit on non-concessional contributions of $500,000 if your balance exceeds the $1.6 million.
The rule about personal deductible contributions being available only to those whose salary income is more than 10% of total income has been removed.
The tax exemption of assets supporting a pension has been removed for transition to retirement pensions. This only applies if you do not have another condition of release like turning 65. In the past, these were not usually set up until you turned 60 as the proceeds of the pension were exempt from tax. The exemption of pensions from income tax will continue for those over 60.
The threshold for paying an extra 15% tax on contributions has been lowered from $300,000 to $250,000
Individuals can also make catch-up concessional contributions by utilising unused amounts of the concessional contribution cap from the previous 5 financial years if their balance is less than $500,000 .
All this has taken 126 pages of legislation to pass parliament.
If you believe that any of these items will affect you then please arrange a consultation with any one of our team. This should be done before the 1st July 2017.