In recent times, there has been a lot of discussion surrounding the changes to superannuation after the 2016 Federal Budget announcements. When planning for super contributions, there is now some certainty, with most of the proposed changes passed by Parliament. The majority of the new rules take effect from 1 July 2017, meaning if you do want to take advantage of the current rules, you will need to act fast. There is a small window of opportunity – just over 3 months - to make the most of your funds and contributions.
To assist with identifying the opportunities when it comes to contributions we’ve highlighted below the top changes where contributions are concerned.
Currently, the concessional contributions cap is $30,000, or $35,000 (for those aged 49 or over on 30 June 2016). Come 1 July 2017, this cap is reduced to $25,000 – for all, regardless of age.
For non-concessional contributions, the cap was - and till 30 June 2017 will continue to be - $180,000. For those under 65 years of age, you can also bring forward up to three years of contributions, allowing you to make up to $540,000 of non-concessional contributions in one financial year. From 1 July 2017, those with superannuation balances of greater than $1.6 million will not be able to make any non-concessional contributions, making this year a last chance at non-concessional contributions for some. The new superannuation rules have slashed the non-concessional contributions cap to $100,000 (or $300,000 if you bring forward contributions). Where the bring forward of contributions has been triggered before 1 July 2017, transitional contribution caps may apply. It is also important to note that there will be a restriction on the ability to bring forward contributions after 1 July 2017 for those nearing the new $1.6 million balance restriction.
The Government’s proposal to remove the ‘work test’ was scrapped. This means that anyone over the age of 65 will still need to work at least 40 hours in a 30 day period before making any super contributions.
The restriction on employees claiming a deduction for personal superannuation contributions has been removed from 1 July 2017, meaning that all individuals under age 75 will be able to claim a deduction for personal super contributions up to their concessional cap.
The income limit for additional tax on concessional contributions is $300,000 up to 30 June 2017. From 1 July this is reduced to $250,000. If you have combined income and super contributions greater than the threshold you will effectively pay 30% tax on your contributions.
If you are a low-income earner, that is, you earn an adjusted taxable income of $37,000 or less, you are eligible for the Low Income Super Tax Offset (formerly the Low Income Super Contribution) from 1 July 2017. This offset is effectively a refund of the tax paid on your concessional contributions, up to a cap of $500.
The start date for the Government’s proposal to allow those with a superannuation balance of less than $500,000 to carry forward unused concessional contribution cap space for up to five years has been delayed to 1 July 2018.
Finally, it is important to remember that there have been no changes to the small business Capital Gains Tax (CGT) Concessions. The small business CGT cap is in addition to the non-concessional contribution cap and it will remain in place after 1 July 2017.
Contributions form just one part of the assortment of changes happening in the superannuation environment. Keep an eye out for Part 2 and 3 of this blog series where we will identify areas of opportunity as a result of the changes to pensions, including CGT relief.
For more information on how to plan for your SMSF contributions, and for advice on what benefits to take advantage of, please contact your usual Hanrick Curran advisor or alternatively Clive Todd or Frances Hill on 07 3218 3900.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.