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29 April 2017

 

Super Reforms Strategies: Lowering the annual concessional (before tax) contributions cap and reduction in the high income contributions tax threshold

 

 

Recently we, quite broadly, discussed all of the New Super Reform changes that are coming into effect only 1 July 2017. As a fundamental and complete understanding of all these changes are essential for everyone. This blog post will continue and go in to depth on two of the ten outcomes:

1.       The lowering of the annual concessional (before tax) contributions cap and,

2.       The reduction in the high-income contributions tax threshold.

Lowering the annual concessional (before tax) contributions cap

From 1 July 2017, the Government will reduce the annual cap on concessional contributions to $25,000.  This is a reduction of $5,000 for people over 50 and $10,000 for members under 50.

What should you be considering?

•         Is it possible to maximise the concessional contributions in the 2016/17 financial year to make the most of the higher cap in the current year before the reduction;

•         Being clear on what counts towards the concessional contributions cap.

·       Does your salary sacrifice amount need to be adjusted with your employer?

 

Reducing the high-income contributions tax threshold

From 1st July 2017, the Government will reduce the 'high-income' threshold, above which individuals will be required to pay an additional 15% tax on their concessional contributions, from $300,000 to $250,000 per annum.

·       According to the ATO, the definition of 'income' for Division 293 tax purposes includes:

o   taxable income (assessable income minus allowable deductions)

o   total reportable fringe benefit amounts (added to income even though they are not taxable)

o   net financial investment loss (i.e. not included as a deduction)

o   net rental property loss (i.e. not included as a deduction)

o   net amount on which family trust distribution tax has been paid

o   concessional super contributions made within the concessional cap for the financial year (known as 'low-tax contributions' for the purposes of this calculation)

What do you need to be considering?

•                     What will be the tax impact from this reduction?

•                     If salary sacrifice contributions are being made, consideration needs to be given about whether this is still effective.

•                     If the individual is receiving discretionary income, consideration needs to be given around this discretionary income being redirected.

•                     If the individual is a joint asset owner of assets that derive income, consideration to be given around the continued joint ownership of those assets, or whether a restructure is beneficial.

•                     If you receive fringe benefits from your employer, are they worth it considering the additional 15% tax on top of the 48.5% tax already applied on fringe benefits?

 

This is general advice, to discuss your situation contact us on 07 3378 7733 for an obligation free consultation with a self-managed superannuation specialist.

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