The Australian Government’s package of superannuation reform was passed in the Senate. These initiatives are designed to 'improve the sustainability, flexibility and integrity of the superannuation system'. While the legislation was passed on 23 November 2016, most changes will take effect from 1 July 2017.
To find out what the changes mean for you and your super, read the summary below.
The annual concessional contributions cap for all ages will reduce to $25,000 (currently the cap is $30,000 for those under age 49 and $35,000 for anyone 49 and over) from 1 July 2017. Concessional contributions that exceed the cap are taxed at your marginal tax rate including the Medicare levy, plus an interest charge. If you’re a medium to high-income earner or approaching retirement, this could impact you.
Anyone with a super balance of $500,000 or less will be allowed to access their unused concessional contributions cap on a rolling basis for a period of 5 years to make additional concessional (before-tax) contributions. Unused amounts carried forward will expire after 5 years. Only unused amounts accrued from 1 July 2018 can be carried forward.
Changes to the existing non-concessional contributions cap are also on the way. Currently you can make non-concessional contributions up to $180,000 each year (or $540,000 for 3 years if you are under age 65). Under the new rules, from 1 July 2017 the annual non-concessional contributions cap will reduce to $100,000 (or $300,000 for 3 years for those under the age of 65). Anyone with an account balance over $1.6 million will be unable to contribute non-concessional contributions to super at all.
Low or high-income earners
Lower-income earners will continue to receive support in the form of the Low Income Superannuation Tax Offset (LISTO). This initiative works much the same way as the current low income superannuation contribution (LISC) and will replace it from 1 July 2017.
More people will be eligible to claim a tax offset for spouse contributions when the income threshold extends to $37,000 (from $10,800). The maximum rebate will remain at $540 for the first $3,000 paid into your spouse’s account.
From 1 July 2017, the income threshold for Division 293 tax on contributions that applies to higher income earners will reduce to $250,000 (instead of the current $300,000).
To talk to us about the impact these super changes could have on you and your super on 1300 861 143.
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