Superannuation reforms – your last chance to act before new changes come into effect

It would be more than fair to say that the majority of superannuation reforms coming into effect from 1 July 2017 are negative changes. Therefore, it is imperative that you and your advisor review your current position to ensure you make the most of the current superannuation system prior to 30 June 2017. With only 2 months left for review and implementation of any strategies prior to 1 July 2017, time is running out!

It is important to note that the changes will affect everyone who is:

  • Contributing to superannuation
  • In receipt of Account Based Pensions (ABP) or Transition to Retirement Income Streams (TRIS) regardless of superannuation member balance.

If you are in receipt of ABPs:

  • You will need to consider whether your current fund and income stream is adequate. All clients in receipt of ABPs will have their ABP account balances recorded as a credit against the $1.6M pension cap as at 1 July 2017. If you intend to roll over the funds to another super structure, you could lose out on quarantined tax exempt pension assets depending on the value of the commutation
  • For those with balances over $1.6M, you will need to consider whether you take advantage of the CGT relief being extended to assets that have to be rolled out of pension phase to accumulation. These rules are complex and action for many will be required in the 2016/17 financial year to ensure your fund is structured in such a way to place you in the best position possible.

Everyone in receipt of TRIS will need to review whether you should continue with your TRIS from 1 July 2017 with the loss of tax exemption on earnings supporting these pensions. You will also need to assess whether you take advantage of the CGT relief on assets required to be rolled out to the standard superannuation tax concessional environment.

Prior to 30 June 2017 most of you will need to consider:

  • The new $1.6 million transfer balance cap, which places a limit on the amount an individual can hold in the tax-free retirement phase from 1 July 2017 and whether you should take up CGT relief
  • Removing the tax-free treatment of assets that support a transition to retirement income stream and whether to take up CGT relief
  • Review of superannuation death benefits. Under the new rules, some people will have no option but to cash out death benefits from their spouses or tax dependents
  • The lower contribution caps for all taxpayers applying from 1 July 2017. The new caps will be:
    o Concessional contributions (pre-tax contributions) — $25,000 per year
    o Non-concessional contributions (after-tax contributions) — $100,000 per year.
  • This financial year will be the last year for eligible people to contribute the three year bring forward amount of $540,000 to super. This also extends to those looking at rebalancing or tax exempting strategies prior to 30 June 2017. These changes will require most people to adjust their investment, contribution, pension and estate planning strategies prior to 1 July 2017
  • Those with over $1.6M total superannuation balances from 1 July 2017 will be prohibited from making any further non concessional contributions to super. These people need to consider their options prior to 30 June 2017.

How can we help?

With just over 2 months to go, there is little time to act. Contact your Bentleys Wealth Advisors on 02 9220 0700, to make an appointment to review your superannuation strategies to ensure you are best placed to minimise the negative impacts of these changes.