On 1 July 2017, a range of super changes will come into effect, and some of these changes may affect you and your super arrangements. Find out more below.
Legislation changes for super accounts
The amount of money you can add to your super before-tax will reduce
From 1 July 2017, the maximum amount you can add to your super before-tax in any one year will be $25,000 (the work test may apply for those between age 65 and 75). At present the cap is $35,000 for people aged 50 years and older, and $30,000 for everyone else.
If you exceed the $25,000 cap after 1 July 2017, any excess contributions will be taxed at your marginal rate and subject to a late tax payment charge. You will have the option to pay any additional tax from your super account, or from your personal savings.
Catch up provisions will be possible where concessional contribution caps have not been reached in previous years for those with total super balances under $500,000. The catch up provisions however do not come into effect until 1 July 2018.
IMPORTANT NOTE: If you act now, you may still be eligible to add before-tax money to your super prior to the end of the financial year, before the lower cap applies. Any questions or want to make a financial planning appointment? Call 1300 65 18 65 today.
The amount of money you can add to your super after-tax will reduce
From 1 July 2017, the maximum amount you can add to your super using after-tax money will be $100,000 in any one year (for people with super balances below $1.6 million). At present the cap is $180,000.
This change also impacts the ‘bring forward rule.’ This is the last year someone under the age of 65 is able to add up to $540,000 to their super in one year.
From 1 July 2017, the ‘bring forward rule’, which allows you to ‘bring forward’ up to 3 years of contributions in any one year, will be reduced to a maximum of $300,000. There are transitional arrangements in place if you already triggered the bring-forward rule prior to 1 July 2017, with the table below outlining the impact of the rule changes.
For those aged between age 65 and 74 you can still make after-tax contributions as long as you satisfy the work test requirements (40 hours in 30 consecutive days within the financial year of contribution).
IMPORTANT NOTE: If you act now, you may still be eligible to add after-tax money to your super prior to the end of the financial year, before the lower cap applies. Any questions or want to make a financial planning appointment? Call 1300 65 18 65 today.
Earn under $37,000 per year?
From 1 July 2017, the Low Income Super Contribution (LISC) will be replaced by the Low Income Super Tax Offset (LISTO). In essence, there will be no changes to how this works – only the name!
If you earn equal or less than $37,000, you may receive a tax refund of up to $500 paid into your super account, every year. This will happen automatically – the ATO will determine if you’re eligible and will make the payment.
IMPORTANT NOTE: If we don’t have your Tax File Number (TFN) on file then the payment can’t be made. Please check if you have provided Statewide Super with your TFN by calling 1300 65 18 65 or by logging onto your secure online account.
Do you earn over $250,000?
If your adjusted taxable income is over $250,000, you may have to pay an additional 15% tax on any before-tax contributions made to your super. This is known as the ‘Division 293 tax’ and is not new, but has instead seen a reduction in the income threshold.
This assessment is done automatically – the ATO will determine if you’re impacted and provide an opportunity for the additional tax payment to be deducted from your super account.
Earn less than $40,000 and your partner wants to boost your super?
If the answer is ‘yes’ to both of the questions above, then they may be eligible to receive a ‘spouse offset.’ Should your partner contribute money into your super account, then a tax offset of up to $540 may be claimed in their tax return. The tax offset is gradually reduced if your income is above $37,000 and completely phases out if your income is above $40,000.
IMPORTANT NOTE: If you are over 65, then you may need to meet other conditions. Simply call 1300 65 18 65 for all the details.
Do you want to add money to your super and claim a tax deduction?
If you are eligible to contribute into super – then here’s some good news!
From 1 July 2017, anyone can make personal super contributions (up to the annual limits) and claim a tax deduction in their tax return.
This was previously restricted only to those who were largely self-employed, but will be available to anyone who is able to contribute to super (up to age 65, or between age 65 and 75 and meeting the work test).
This is great news if you want to reduce your taxable income or capital gains tax, and have not maximised your concessional contribution cap.
Are you departing from Australia after a working holiday?
From 1 July 2017, those on a working holiday in Australia will pay 65% tax on their Departing Australia Superannuation Payment (DASP) when leaving the country. This applies to 417 (working holiday) or 462 (work and holiday) visas. At present the DASP is taxed at 38%.
Are you set to receive the government co-contribution? Read on!
From 1 July 2017, there are additional requirements to receive a government co-contribution, which include:
- having a total super balance less than $1.6 million as at 30 June 2017 (for the 2017/18 financial year)
- not breaching the after-tax contributions cap.
Anti-detriment payments are no longer paid
From 1 July 2017, Statewide Super (and all other super funds) can no longer pay anti-detriment payments on death benefits to eligible beneficiaries.
IMPORTANT NOTE: Should a fund member pass away on or before 30 June 2017, we can still include an anti-detriment payment for eligible beneficiaries. Statewide Super has until 30 June 2019 to pay the benefit.
Legislation changes for pension accounts
Want to start a superannuation pension?
Known as the ‘Transfer Balance Cap’, the maximum that you can transfer into your pension account will be $1.6 million as at 1 July 2017. It is important to note that this cap applies to the combined amounts in all of your pension accounts (excluding Transition to Retirement accounts) and will be indexed in line with CPI.
You have the ability to make multiple transfers, as long as it is below the $1.6 million maximum. Any existing money in your pension account (as at 30 June 2017) will be counted toward the ‘transfer balance cap.’ If you anticipate your total pension balance exceeding $1.6m as at 30 June 2017 you may need to make arrangements to reduce this balance below the cap.
However, please note that should your pension account exceed $1.6 million over time through investment earnings, you will not exceed the cap. Conversely, if your pension account balance decreases overtime (due to investment losses or pension payments) and drops below $1.6 million, you can’t ‘top it up’ if you have already used your cap.
IMPORTANT NOTE: If you’re worried that you might be near the cap, you may wish to speak to the experts at Statewide Super Financial Planning who can assess your current situation. Simply call 1300 65 18 65 to make an appointment.
Do you have a Transition to Retirement (TTR) income stream?
Currently, investment earnings within transition to retirement income streams are tax exempt. From 1 July 2017, this tax rate will be changed to the same 15% tax rate that currently applies to investment earnings in accumulation phase. The tax treatment of income paid by transition to retirement income streams will remain unchanged.
IMPORTANT NOTE: If you currently have a TTR income stream and you want to better understand how this change in legislation affects you, please call 1300 65 18 65.