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Eight Key Outcomes from the Super Reforms

The Super Reforms have now, as of 23 November 2016, been passed as legislation.  These Reforms are some of the biggest changes to our Superannuation system in the last decade – they affect elements of how money is contributed to super and how money is paid out in the form of benefits.  Various tax concessions, such as transition to retirement income streams, have been tightened and other measures that were possible will be no longer possible from 1 July 2017.

Over the next few posts we will be taking each point into more depth so that you can be aware of the changes and how they affect you before the end of the financial year. Because NOW is the time to start thinking about how the reforms might impact on your Superannuation Fund.

The following list, outlines the key changes which you need to consider in relation to your own super.  This is general and factual information only on how the super reforms could impact you and we have not considered nor made any personal recommendations within this report.   

 

1.      Introduction of the $1.6M transfer balance cap

·       These measures apply to the combined total of ALL superannuation accounts.  Should any members have superannuation accounts outside of the SMSF care must be taken to ensure that all balances are considered.

·       From 1 July 2017, any amount above $1.6m will need to be placed back into accumulation for the member (and the earnings on those funds will be taxed at 15%) or withdrawn from the Superannuation fund (and the earnings on any amounts invested externally will be taxed at the marginal tax rates of the member).

2.       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 either $5,000 or $10,000 depending on the age of the member.

3.      Reducing the high-income contributions tax threshold

·       From 1 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.

4.      Lowering the annual non-concessional (after tax) contributions cap

·       From 1 July 2017, the Government will reduce the annual cap on non-concessional contributions to $100,000.  This is a reduction of $80,000 per member.

·       Also, any member with a balance of $1.6m or more will no longer be eligible to make non-concessional contributions and special restrictions apply to any bring forward provisions if the balance is above $1.4m.

·       These measures apply to the combined total of ALL superannuation accounts.  Should any members have superannuation accounts outside of the SMSF care must be taken to ensure that all balances are considered.

5.       Introducing the Low-Income Superannuation Tax Offset

·       From 1 July 2017, the Low-Income Superannuation Tax Offset will be introduced.  It effectively refunds the tax paid on concessional contributions by individuals with a taxable income of up to $37,000.  The maximum refund is $500.

6.       Allowing more people to claim a tax deduction for personal concessional contributions to super

·       From 1 July 2017, the Government will allow ALL members under the age of 65, and those members aged between 65 & 74 who meet the work test, to claim a tax deduction for personal contributions made up to the concessional contributions cap of $25,000 per annum.

7.       Allowing catch up concessional (before tax) contributions

·       From 1 July 2018, the Government will help people 'catch-up' their super contributions by allowing individuals with a total balance of less than $500,000 the ability to carry forward any unused concessional cap space for up to 5 years

8.       Taxation of pensions supporting transition to retirement income streams

·       From 1 July 2017, pensions supporting a transition to retirement income stream will no longer be tax exempt.

If you would like assistance or advise in relation to your Self-Managed Superannuation Fund Overells have qualified advisors that can assist you. For an obligation free consultation contact us

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