The biggest changes to superannuation in over 10 years start coming into effect from 1 July 2017. As we approach the end of the financial year, you should take a moment to go through the following updates to ensure you’re ready for the coming changes and to avoid getting caught out.
Reduced Concessional Contributions Caps for all
Start Date: 1 July 2017
The concessional contribution caps (i.e. the annual limit on the amount of money that you can ‘concessionally’ put into super at the tax rate of 15%) will be reduced to $25,000 pa, regardless of your age.
| Age | Current Concessional Contributions Caps | New Concessional Contributions Caps |
|---|---|---|
| 49 & under | $30,000 | $25,000 |
| 50 & over | $35,000 | $25,000 |
You may incur penalties and additional tax for going over your contributions cap. Any SG, salary sacrifice contributions or company-paid super insurance premiums you receive will count towards your cap.
New ‘catch-up’ Concessional Contributions caps
Start Date: 1 July 2018
If you have superannuation assets of less than $500,000 you can accumulate any unused concessional contributions cap amounts on a rolling 5 year basis. This can assist you if you go through periods of broken or inconsistent work by allowing you to make additional ‘catch-up’ contributions when you have the ability to do so. Please see the table on the next page for an example of how this works.
| Financial Year | Base cap | Actual contribution | Unused cap | Accumulated unused cap |
|---|---|---|---|---|
| 2018-19 | $25,000 | $10,000 | $15,000 | $15,000 |
| 19-20 | $25,000 | $10,000 | $15,000 | $30,000 |
| 20-21 | $25,000 | $10,000 | $15,000 | $45,000 |
| 21-22 | $25,000 | $10,000 | $15,000 | $60,000 |
| 22-23 | $25,000 | $35,000 | -$10,000 | $50,000 |
Reduced Non-Concessional Contribution caps
Start Date: 1 July 2017
The annual limit on the amount of after-tax personal contributions that can be put into super will reduce to $100,000 pa (or up to $300,000 if the three year bring forward provisions are utilised). The current limit is $180,000 (or $540,000 based on the same provision). You can still make contributions at the current limit, but you will have to act now.
Additionally, you cannot make non-concessional contributions into super if your total super assets exceed $1.6m.
New Low Income Super Tax Offset
Start Date: 1 July 2017
People with an adjusted taxable income of up to $37,000 pa will receive a refund into their super account of the 15% super contributions tax paid up to a maximum value of $500 pa.
Increased threshold for tax-free spouse contributions
Start Date: 1 July 2017
The income threshold for eligibility for the Spouse Contribution Tax Offset (worth up to $540 pa) has increased to $40,000. Previously, a contributing spouse was only eligible for the offset if their spouse earned less that $13,800 pa.
Removed tax-free TTR-pension earnings
Start Date: 1 July 2017
Investment earnings for those operating Transition to Retirement (TTR) pension accounts will no longer be tax free from 1 July 2017. Instead, they will be taxed at the normal supertax rate of 15%.
New $1.6m limit for all pensions
Start Date: 1 July 2017
A new lifetime limit of $1.6 million will be introduced to cap the amount of super savings that can be transferred into pension assets (which are exempt from the usual 15% tax in investment earnings). Those who have previously tranferred more that $1.6m into the pension environment will be required to commute the excess amount back into the superannuation environment. This means that investment earnings on this amount will no longer be tax free and will instead by taxed at the concessional superannuation rate of 15%.
Division 293 tax threshold reduced to $250,000
Start Date: 1 July 2017
Currently, those earning over $300,000 pa have an additional 15% tax levied on their concessional super contributions (i.e. they are taxed at a total of 30%). From 1 July 2017, the income threshold above which the extra 15% contributions tax is payable will be reduced to $250,000 pa.
