Since the federal budget was handed down in May 2016, there have been some changes to the announcements as well as 3 tranches of legislation released. There is a lot of detail in the legislation which is in currently still in draft form. With only 3 parliamentary sitting weeks until Christmas it is unlikely that these bills will be finalised, read and passed through parliament, meaning we will be waiting until February to finalise legislation that is to be implemented from 1 July 2017.
The changes to the announcements are:
- The $500,000 lifetime non-concessional superannuation contribution cap has been scrapped. The annual nonconcessional limit will be $100,000 pa (set at 4 times the concessional limit) and you are still able to bring forward 3 years’ of contributions. Special provisions apply if you straddle the 1 July 2017 implementation date.
- It appears that special provisions will apply to the cost base of assets if you are in a tax-exempt phase on 30 June 2017. The legislation is extremely complex and the government is hoping for input from industry practitioners to make it more workable.
- Segregation of assets will not be allowed for funds with more than $1.6m. Segregation would have allowed allocation of high income paying assets to the tax-exempt pension phase account with low income paying assets to the tax paying accumulation phase account.
- People between the ages of 65-75 will still need to meet a work test if they want to make a contribution into superannuation. Other important superannuation related announcements that remain unchanged since the budget announcements are:
- Concessional contribution (tax-deductible) cap lowered from $30,000 ($35,000 for people over age 50) to $25,000
- The “10% rule” will be removed meaning that anyone – not just the self-employed – can claim a tax deduction in their personal return for contributions made into super
- Non-concessional contribution cap lowered from $180,000 per year to $100,000 per year. The 3-year bring forward will therefore lower from $540,000 to $300,000 with transitional rules applying from 1/7/17
- No further non-concessional contributions may be made after 30/6/17 if your balance is more than $1.6m
- Division 293 tax which imposes additional tax on superannuation contributions will be lowered from $300,000 to $250,000.
- A transfer balance cap will be implemented meaning that you can only have $1.6m in pension phase enjoying tax exempt income. Any amounts above this threshold can either remain and pay earnings tax of 15% or be removed from the superannuation environment.
- The earnings on transition to retirement income streams will no longer be tax exempt meaning that for people aged between preservation age and age 65 who are not retired, meeting a condition of release is very important.
A client recently commented that they made an important decision regarding their super: that decision being they would not make any decisions without speaking to a Bentleys superannuation expert! The changes are to be implemented on 1 July 2017 complex and if you have any questions speak to speak to Jennie Lynn, Client Director Superannuation, Bentleys NSW on 02 9220 0700.