Understanding the Super changes from 1 July 2017

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Understanding the Super changes from 1 July 2017

Understanding the Super changes from 1 July 2017

The changes to the superannuation system, announced by the Australian Government in the 2016–17 Budget, have now received royal assent. These changes were designed to improve the sustainability, flexibility and integrity of Australia’s superannuation system. Most of the changes will commence from 1 July 2017.

To help you understand the changes coming and if they will affect you we have an overview below:


Spouse Tax Offset

Current rules: Individuals can claim an offset up to $540 for contributions to spouse super fund if their total income including fringe benefits and reportable employer super contributions are under $13,800.

From 1 July 2017: Individuals can claim an offset up to $540 for contributions to spouse super fund if their total income including fringe benefits and reportable employer super contributions are under $40,000.  To receive maximum offset of $540 their total income must be below $37,000.

For more information see the ATO website here.


Personal Super Contributions Deduction

Current rules: Individuals can claim a deduction for personal super contributions where they meet certain conditions.  One of this conditions is that less than 10% of their income if from salary and wages.

From 1 July 2017:  This condition will be removed.  All other conditions will remain the same.

For more information see the ATO website here.


Low Income Superannuation Tax Offset (LISTO)

Current rules: The Low Income Superannuation Contribution (LISC) policy currently applies.  Where an individual’s taxable income is below $37,000, a contribution will be paid to their super fund equal to 15% of their total concessional (pre-tax) super contributions up to a maximum of $500.

From 1 July 2017:  The limits and contribution amount will remain the same, however the LISC policy will now be replaced by the new Low Income Superannuation Tax Offset (LISTO).

For more information see the ATO website here.


Transfer Balance Cap

Current rules: No cap currently applies

From 1 July 2017:  A cap will be introduced on the total amount that can be transferred into the tax-free retirement phase for account-based pensions.  For the 2017-18 year the cap will be $1.6 million and will be indexed in line with CPI in subsequent years.

For more information see the ATO website here.


Non-Concessional (after-tax) Contributions Cap

Current rules: $180,000 per financial year.  Can bring forward future year caps to make contributions up to 3 times the cap in one financial year (i.e., pay $540,000 in 2015-16 and $0 in 2016-17 and $0 in 2017-18).

From 1 July 2017:  $100,000 per financial year.  Can bring forward future year caps only if:

  • They are under 65
  • Total super balance is less than transfer balance cap after non-concessional contributions are made (e.g if making $200,000 in contributions, total super balance must be under $1.5 million).

For more information see the ATO website here.


Concessional (pre-tax) Contributions Cap

Current rules: $30,000 per financial year (if aged under 50 years old) or $35,000 per financial year (if aged 50 years old or over)

From 1 July 2017:  $25,000 per financial year (all ages)

For more information see the ATO website here.


Carry-Forward of Unused Cap for Concessional Contributions

Current rules: No carry-forward rules currently

From 1 July 2018:  Individuals will be able to carry-forward concessional super contribution caps if they have a total super balance of less than $500,000.  They will be able to access their unused cap for a period of five years on a rolling basis.  Any unused caps after 5 years will expire.

The first year in which you can access your unused concessional contribution cap is the 2019-20 financial year.

For more information see the ATO website here.


Co-Contributions

Current rules: To receive a government co-contribution you must:

  • have made one or more eligible personal super contributions to your super account during the financial year
  • pass two income test
  • be under 71 years old at end of the financial year
  • not hold a temporary visa during the financial year
  • lodge your tax return for the relevant financial year

From 1 July 2017:  Current conditions will still apply but individuals must also have a total super balance of less than transfer balance cap and must not have contributed more than the non-concessional contributions cap.

For more information see the ATO website here.


Reduction of Division 293 income threshold

Current rules: Individuals with income and concessional super contributions in excess of $300,000 trigger a Division 293 assessment

From 1 July 2017:  The threshold will lower to $250,000.  If income plus concessional contributions exceed $250,000 an additional 15% tax will be imposed on the amount over the threshold up to the total of their concessional contributions not exceeding their concessional contributions cap.

For more information see the ATO website here.


Transition to Retirement Income Streams

Current rules: Where a member receives a Transition to Retirement Income Stream (TRIS), the fund receives tax-free earnings on the super assets that support it.

From 1 July 2017:  The government will remove the tax-exempt status of earnings from assets that support a TRIS.  Earnings from assets will be taxed at 15% regardless of the date the TRIS started.

Members will also no longer be able to treat super income stream payments as lump sums for taxation purposes.

For more information see the ATO website here.


Retirement Income Stream Products

Current rules:  There are rules restricting the development of new retirement income products.

From 1 July 2017:  The government will remove these barriers by extending tax exemption on earnings in the retirement phase of products such as deferred lifetime annuities and group self-annuitisation products.

For more information see the ATO website here.


Removal of Anti-Detriment Payment

Current rules: The anti-detriment provision enables a fund to claim a deduction in their tax return for a top-up payment made as part of a death benefit payment where the beneficiary is the dependent of the deceased.  The top-up amount represents a refunds of a member’s lifetime super contribution tax payments into an estate.

From 1 July 2017:  The government is removing this provision and funds will no longer be able to claim this deduction.

For more information see the ATO website here.


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