Superannuation sees the biggest changes from 1 July 2017. We’ve reviewed the main changes which may impact you and these are shown below.
Spouse super contributions
Changes to super make it easier for couples to benefit by adding to each other’s Super. If your spouse earns less than $13,800 pa and you make a contribution to their super, you can claim a tax offset equal to 18% of the contributions, up to $540. From 1 July 2017 your spouse’s income threshold will increase to $37,000. Even if they earn up to $40,000, you could still be entitled to a partial super tax offset.
Low-income super tax offset
Low-income earners on up to $37,000 a year may be eligible for up to $500 super contribution from the Government, providing it equals no more than 15% of before tax (employer and salary sacrifice) super contributions.
Carry your super cap forward
A new ‘carry forward’ rule for before-tax contributions is being introduced to help people catch up on super contributions later.
This will benefit those who have had time out of the workforce, those who work part-time or have irregular work patterns. If you have contributed less than your before tax (concessional) cap, you can roll over the unused portion of your concessional contribution cap for up to 5 years, allowing you to make additional contributions in future years where your income allows you to make such contributions.
High-income earners (people earning more than $250,000)
Higher income earners could be affected by a reduction in both before and after tax contribution limits.
If your combined income and super contributions exceed $300,000 you may have to pay extra tax on the excess, this is known as Division 293 tax. From July the threshold for Division 293 tax will be reduced to $250,000, meaning more higher income earners will have to pay extra tax.
Tax deductions for personal super contributions
Self-employed people and those that earn less than 10% of their income from salary or wages, can claim a tax deduction for any contributions they make to super. The contributions are then treated as ‘before tax (concessional) contributions’. From 1 July 2017, the 10% rule will be removed, making it easier for more people to make use of their concessional contributions cap.
Before tax super contributions (concessional)
On 1 July 2017, the concessional contributions cap will reduce to $25,000 for everyone. This means the number of contributions you can make where the concessional tax rate applies, will reduce.
However, you will be able to ‘carry-forward’ any unused concessional contributions cap on a rolling 5-year basis.
After tax super contributions (non-concessional)
The after-tax contributions cap is reducing from $180,000 to $100,000 per year. You will still be able to bring forward up to three times the cap to make larger one-off contributions if you are under age 65 and have not reached the new transfer balance cap. The full benefit you bring forward may not apply if your total super balance is close to the balance transfer cap so best to check with your superannuation advisor first.
Transition to retirement (TTR) pensions
Transition to retirement (TTR) pensions will become less tax effective and there will be a cap on how much you can transfer into a tax-free super pension. From 1 July 2017, the earnings of a TTR pension will be taxed up to 15%, the same as they are in a super accumulation account.
Super transfer balance cap
If you are aged 60 or older, income payments from an account-based super pension are tax-free. From 1 July 2017, there will be a limit on how much super you can transfer to a tax-free account-based pension. This is called the ‘transfer balance cap’ and it will initially be set at $1.6 million but will be indexed by CPI, rounded down to the nearest $100,000.