Our partners from Bridges financial planning have summarised the changes which may affect you to your superannuation from 1 July 2017.
Changes to concessional contributions
Concessional contributions are contributions you can make to super with your before-tax salary. For most people concessional contributions are taxed at just 15 per cent – not your marginal tax rate.
What are the new caps for concessional contributions?
The Government has reduced the cap on concessional contributions as shown in the following table:
||Current annual cap*
||Annual cap after 1 July 2017*
|50 or over
* Remember – your employer’s 9.5 per cent compulsory contributions count towards your concessional contributions cap.
Carry forward unused contributions
While the annual concessional contribution cap is coming down, from 1 July 2018 new rules let people with super balances under $500,000, ‘carry forward’ up to five years of the unused portion of their concessional contributions cap.
Mary makes a payment of $10,000 in concessional contributions in the 2018/19 financial year, and $15,000 in concessional contributions in the 2019/20 financial year.
In the 2020/21 financial year, Mary will be able to ‘carry forward’ her unused cap of $25,000 from the previous two financial years, plus the $25,000 limit for the year, for a total contribution of $50,000.
Currently concessional contributions are taxed at 15 per cent for people who earn less than $300,000 climbing to 30 per cent for those who earn more.
From 1 July 2017, the 30 per cent tax rate commences on incomes of $250,000 or more.
Changes to non-concessional contributions
Non-concessional contributions (NCCs) are those contributions you make to super with your after-tax dollars.
What are the new caps for NCCs?
The Government has reduced the cap on non-concessional contributions from 1 July 2017 as shown in the following table:
$540,000 over three years for those under 65
up to $300,000 over three years for those under 65
In addition to the lower annual caps, people with a super balance of more than $1.6 million will not be able to make non-concessional contributions from 1 July 2017.
The ‘bring forward’ rule is also changing
The ‘bring forward’ rule is a taxation rule that lets you contribute up to three times the NCC cap in a financial year (for those under age 65 at any time in the year, by bringing forward your allowed contribution from the next two financial years.
With the new $1.6 million super balance cap, the number of years you can bring forward your contribution may be limited by your super balance as shown in the following table:
|Balance is between
||Maximum NCC cap available
||$300,000 ( up to three years annual cap)
||$200,000 ( up to two years annual cap)
||$100,000 ( no bring forwards available)
Have you already triggered the bring-forward rule?
If you trigger, or have triggered, the bring-forward rule in 2015/16 and 2016/17 and have not fully used your NCC bring- forward limit before 1 July 2017, your available limit will be lowered as follows:
1. If you triggered the bring-forward cap in 2015/16, your cap will be reduced from $540,000 to $460,000 ($180,000 for 2015/16 +$180,000 for 2016/17+
$100,000 for 2017/18)
2. If you trigger the bring-forward cap in 2016/17, your cap will be reduced to $380,000 ($180,000 + $100,000 + $100,000).
What else is changing?
Removing the earnings exemption for assets backing Transition to Retirement pensions
If you’re close to retirement, there may be the ability to access your super in a limited fashion through a transition
to retirement pension.
Currently, income and capital growth on the investments behind a transition to retirement pension receive the same tax treatment as a full retirement account-based pension, meaning these earnings are tax free. From 1 July 2017, investment earnings on assets invested in a transition to retirement pension will be taxed at up to 15 per cent – in line with existing tax rates on accumulation funds.
Removal of the anti-detriment payment
When someone passes away, their super benefit must be paid to a dependant (such as a spouse or child) or their estate. When this payment is a lump sum, some dependants are able to apply for an additional payment which effectively refunds a significant portion of tax paid on earnings and contributions. This ‘anti-
detriment payment’ is being removed for people who pass away after 1 July 2017, and for any death benefits paid after 1 July 2019.