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1 May 2017

Super Reforms Strategies

Lowering the annual non-concessional (after tax) contributions cap, allowing more people to claim a tax deduction for personal contributions to super and taxation of pensions supporting the transition to retirement income streams

This will be the final post in discussing the New Super Reforms coming into effect on 1 July 2017. This will allow you to be prepared for the upcoming changes and maximise the remainder of the 2016/17 financial year in your SMSF fund.

This post will discuss:

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

2.       Allowing more people to claim a tax deduction for personal concessional contributions to super and,

3.       Taxation of pensions supporting the transition to retirement income streams

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

What is the new rule?

From 1 July 2017, the Government will reduce the annual cap on non-concessional (contributions that are made into your SMSF that are not included in the SMSF's assessable income, more commonly, personal contributions are made in which no income tax deduction is claimed) 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.

What will be the tax impact from this reduction?

•                     The ability to maximise the higher non-concessional contribution caps before 30 June 2017;

•                     Whether the 'bring-forward' rule has been triggered in the last 3 years and what the impact is?

•                     The future ability to make non-concessional contributions, and whether these should be directed to a spouse or children.

 

Taxation of pensions supporting the transition to retirement income streams

Until 31 June 2017 if you are semi-retired and are supplementing your income through your pension the earnings on the pension are tax free. However, after 1 July these earnings will now be taxed at a concessional rate of 15%.

What is the new rule?

·       From 1 July 2017, the Government will remove the tax-exempt status of income earnt from assets supporting transition to retirement income streams (TRIS).  These earnings will be taxed concessionally at 15%.

What you need to consider

·       Can the individual meet a 'condition of release' and have the TRIS converted to an account-based income stream?

·       Is the receipt of the TRIS still appropriate from a taxation and cashflow perspective post 1 July 2017?

 

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

What is the New Rule?

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.

What you need to consider

•        Whether the individual will benefit from a personal tax deduction for the concessional contributions made to the fund.

 

This advice is of a general nature, for tailored, personal advice contact us on 07 3378 7733 for an obligation free consultation with a qualified Self-Managed Superannuation expert.

 

 

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