I have outlined some of the proposed changes to superannuation, with some seemingly having retrospective implications for those already in retirement phase. We can be certain, that if life nothing remains the same and with change comes the challenge of how to best adapt.
What we can be certain is that Santa certainly did not wrap any superannuation gifts for us this year.
The devil may well be in the detail and we will reveal more around particular strategies and action steps to get the most from these new rules.
From 3 May 2016:
· $500k Lifetime Non-Concessional Contributions Cap PP – Counting appears to commence from 1 July 2007. However, contributions made before 3 May 2016 cannot result in an excess. Amounts contributed beyond the lifetime cap will need to be removed or be subject to penalty tax.
From 1 July 2017:
· $1.6m per person pension phase cap – or up to $3.2m for couples is the amount that can be accumulated in tax free pension accounts. Members already in retirement phase with balances over $1.6m will be required to reduce their retirement balance to $1.6m each by 1 July 2017. If not, there may be penalties similar to those imposed on excess non-concessional contributions.
· Catch-up concessional contributions allowed – Access to unused annual concessional cap amounts will be allowed to be carried forward for persons with super balances below $500k (carried forward 5 year rolling balance). This only accumulates from 1 July 2017.
· Concessional contributions cap to be lowered to $25k per person – Currently, these are $30k under age 50 and $35k for those aged 50 or more. Consider a double contribution strategy now if possible.
· Contribution work-test eliminated – All people under age 75 will now no longer have to satisfy a work-test to make contributions or to receive them from your spouse.
· Personal tax deductions for all – All individuals up to age 75 will be entitled to claim a tax deduction for on contributions regardless of employment circumstances, work status or business arrangements.
· Division 293 tax threshold lowered – Currently, a 30% total tax (15% standard rate + 15% “surcharge”) is applied to concessional contributions for those persons on “incomes” of $300k or more. This threshold is to be lowered to $250,000, so the “surcharge” cuts in sooner.
· Anti-detriment removed from death benefit payments – This legacy provision was inconsistently applied by various super funds and is to be removed (so no tax deduction for the fund and no refund of contributions taxes for dependant beneficiaries).
· Transition to retirement pensions – The Govt plans to remove the tax exemption on earnings of assets supporting transition to retirement pensions (for persons over preservation age and not retired). They will also remove a tax loophole that treats payments as tax free lump sums (although may be available for 15/16 & 16/17).
· Low income earner measures – The spouse income threshold is to be raised to $37k, from $10.8k to enable more people to access up to a $540 tax credit. Similarly, members with incomes below $37k will be able to claim benefit from $500 tax offset reduce effective tax rate on concessional contributions.
It is early days but the government seems intent on making changes to superannuation, to support lower income workers and to remove some of the generous concessions that already exist for larger balances.
Ongoing advice and strategic reviews will mean that I will help unlock any advantage possible as well as adapt to any changes well in advance of the masses.
If you have a specific question, post it below and I will answer it.