Legislation implementing the substantive changes to superannuation system that were announced in the 2016 Budget has now passed through Parliament. We now need to get on top of the changes and make sure we are ready for their implementation as most of them are effective from 1 July 2017.
Some of the changes are quite fundamental. Here is brief summary of the main points are:
The concessional contributions cap drops from 1 July 2017 to $25,000 per annum for everybody.
Starting from 1 July 2019, unused concessional contributions caps can be carried forward and used in the next 5 years. The first year that an unused concessional contribution cap can be carried forward is the 2018/19 year. This is only available if your total superannuation balances in all funds combined is $500,000 or less just before the beginning of the year you are using a prior year cap.
From 1 July 2017 the non-concessional contributions cap reduces to $100,000 per annum (4 times the concessional contributions cap), and can only be used if your total superannuation balances in all funds combined is under $1.6 million just before the beginning of the financial year.
The bring forward rules for non-concessional contributions caps remain, but become vastly more complex. Transitional rules apply if the bring forward rules have been triggered before 1 July 2017.
A transition to retirement pension (TTR) ceases to qualify as a pension from 1 July 2017, so income from assets supporting a TTR will no longer be free from tax in the fund.
A partial commutation of a pension from 1 July 2017 does not count to the minimum pension payment.
The 10% test for deducting personal contributions is removed from 1 July 2017. This means more people can claim tax deductions for personal contributions to superannuation from 1 July 2017.
Anti-detriment payments are abolished for someone who dies after 30 June 2017, and for a payment made after 30 June 2019.
The biggest and most complex of all – the changes implement a 'transfer balance cap' and 'transfer balance account' for every member with a pension. Effectively, this limits the starting amount that can be in pension phase for a member to $1.6 million. This applies from 1 July 2017 and will require a review of all clients with pensions.
If you are in any doubt of how these changes affect you, you should seek appropriate financial advice.
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