Superannuation changes on the horizon
The Australian Government’s 2016 Federal Budget report and the subsequent changes that have been made to its plans surrounding superannuation reform passed through parliament house towards the end of last year.
New regulations are now set to become part of Australia’s superannuation law, including changes to super contributions and the associated tax breaks that are available. These adjustments will be introduced starting 1 July 2017.
So what could do these changes mean for you and your financial situation? Find out as we discuss some of the upcoming legislation below.
After-tax super contributions cap to be reduced
In the first iteration of its budget report, the Australian government planned to introduce a $500,000 lifetime cap on non-concessional super contributions. However, due to significant community back-lash, this policy will no longer be implemented.
The new alternative is an annual after-tax contributions cap of $100,000, which will be replacing the current cap of $180,000. Anyone under the age of 65 will still have the ability to bring forward three years’ worth of after-tax super contributions, but with a maximum cap set at $300,000 under the bring-forward rules.
Before-tax super contributions cap lowered
The concessional contributions cap will be decreased from the current $30,000 (or $35,000 if you’re 50 years or older) to $25,000 per year for the whole nation, regardless of age.
Pension cap of $1.6m introduced
If you’re converting your super into a pension to derive an income in retirement, you’ll be restricted to a limit of $1.6 million in your tax-free pension account – not including subsequent earnings.
If you already have a balance above that, the excess will need to be placed back into the super accumulation phase, where earnings will be taxed at the concessional rate of 15%, or taken out of super entirely.
TTR income streams no longer tax exempt
Investment earnings on super fund assets that support a pension are currently tax free. However, this will no longer apply to transition to retirement (TTR) income streams.
Earnings on fund assets supporting a TTR income stream will be subject to the same maximum 15% tax rate that applies to accumulation funds.
Where to from here?
If you want to find out more about the Government’s superannuation reforms, please talk to us today.