With new regulations set to become part of Australian superannuation law, some of the rules around super contributions and the tax breaks available will change from 1 July 2017.
See what the changes could mean for you and what opportunities you could take advantage of before the end of financial year.
Initially, the government planned to introduce a $500,000 lifetime cap on after-tax (non-concessional) super contributions, which it will no longer be implementing.
Instead, an annual after-tax contributions cap of $100,000 will be put in place, replacing the current cap of $180,000. Those under age 65 will still have the ability to bring forward three years’ worth of after-tax super contributions, with a maximum of $300,000 under the bring-forward rules.
The before-tax (concessional) contributions cap will decrease from $30,000 (or $35,000 if you’re turning 50 years of age or older this financial year) to $25,000 per year for everyone, irrespective of age.
If you’re converting your super into a pension to derive an income in retirement you’ll be restricted to a limit of $1.6 million in your tax-free pension account, not including subsequent earnings.
If you already have a balance above that, the excess will need to be placed back into the super accumulation phase, where earnings will be taxed at the concessional rate of 15%, or taken out of super completely.
Investment earnings on super fund assets that support a pension are currently tax free. However, this will no longer apply to transition to retirement (TTR) income streams.
Earnings on fund assets supporting a TTR income stream will be subject to the same maximum 15% tax rate that applies to accumulation funds.
To find out how reforms to the superannuation system could affect you, speak to your financial adviser. If you need help finding one, call us on 1300 346 837 or visit our locations page.
Meanwhile, to recap on some of the other changes coming in and when they’ll take effect, check out our May Federal Budget 2016-17 roundup and our subsequent article published in September, regarding changes to the government’s initial plans.