Here's what you need to know about super changes
Legislative changes to implement the Government's superannuation reforms are taking effect from 1 July 2017.
Read on and watch our video below to find out how you can make the most of your super before the changes come into effect.
New super rules explained
From 1 July 2017, the amount you can contribute to your superannuation will be decreasing, and many Australians will be affected. The maximum contributions will be reduced and the maximum balance of tax-free pension funds that you can save for retirement will be capped at $1.6M.
Additionally, Australians who are transitioning to retirement using a Transition to Retirement (TTR) pension will be paying more tax, while those receiving a pension will need to put more thought into where their living expenses come from and how they manage their estate planning with superannuation.
Changes to your super contributions
You can contribute more into super in the current financial year compared to what will be possible after 1 July 2017. The new rules will reduce after-tax or non-concessional contribution from $180,000 to $100,000; while your maximum pre-tax or concessional contributions will be reduced to $25,000.
Watch Peter Hogan, Head of Technical at Self Managed Super Fund Association as he explains what these changes can mean to you.
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Frequently Asked Questions
How much can I deposit as a non-concessional contribution before the changes come into effect 1 July?
Under the current rules you are able to make an $180,000 non-concessional contribution each year. Depending on what other non-concessional contributions you have made since 1 July 2014, you may be able to use the ‘bring forward’ rule to deposit a total of $540,000 before 1st July 2017 if you are under 65.
A non-concessional contribution is a deposit you make to your super fund with funds that you have already paid tax on. This could be funds received from a sale of a property, shares, funds from your personal savings, an inheritance, or lottery winnings.
From 1 July 2018 if you have less than $500,000 in total super then you can carry forward your unused concessional contributions for up to five years.
Concessional contributions are also known as before tax contributions and are generally contributed by your employer or through salary sacrifice. Non-concessional contributions are after tax contributions for which an individual hasn’t claimed a tax deduction.
Yes. The income threshold has been lowered from $300,000 p.a. to $250,000 p.a. For more information on ‘Division 293 Tax’, visit the ATO.
The government will remove the tax exemption on fund earnings that support a TTR from 1 July 2017. Essentially a TTR will now be taxed at the same rate as funds in the accumulation phase.
No, however the amount you can contribute will be limited if you have more than $1.6M in super. Additionally, there is now a cap of $1.6M that can be transferred into retirement phase.
If you’re in pension phase now, whatever is in your pension on 1 July 2017 is the relevant value. So for example, if you have $2M, you will need to move back the $400,000 into an accumulation account (where earnings will be taxed at 15%) or withdraw the excess from superannuation all together.
Yes, it will be indexed for inflation in $100,000 increments.
What is the new maximum balance that I can accumulate in my superannuation pension account that receives tax free status?
The new maximum balance that receives tax free status will be $1.6M plus any earnings growth after the pension starts. Previously there was no maximum balance.
We recommend visiting the SMSF Association website to find an adviser.
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