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New Superannuation Rules

The changes made to superannuation in the 2016 Budget by the government created quite a lot of controversy following their announcement. Many of these changes lead to individuals, particularly retirees, questioning the future of the Superannuation system. However, on September 15th Treasurer Scott Morrison announced some new adjustments, suggesting the Government is taking into consideration the concerns expressed by voters and those involved within the industry.

Below is a summary of some the measures that have been amended, as well as those that will stay in place as outlined in the budget. The details of each measure will be confirmed once draft legislation is published, and the final outcome will only be known after Parliament considers the legislation.

  • Concessional and Non Concessional Contributions: Contribution caps for concessional contributions will stay at $25,000 pa per person. Non Concessional contributions will be capped at $100,000 per year, however individuals will be able to utilise the ‘Bring Forward’ rule. This would allow for three years of contributions to be made in one year if you’re under 65. These contribution changes will take place on the 1st of July, 2017
  • $500,000 Lifetime Cap: The federal government original proposal was to replace the existing non-concessional contribution (NCC) cap with a lifetime limit of $500,000, including all NCCs made since 1 July 2007. This has now been completely removed.
  • $1.6 Million Limit on Tax Free Earnings: During pension phase each member will have a $1.6 million limit on the portion of their super that will be tax free. For individuals who have a balance over $1.6 million a concessional tax of 15% will be imposed on earnings above the $1.6 million limit, as per the budget.
  • $1.6 Million Limit: If you have more than $1.6m in your super fund, you can’t make non-concessional contributions after 1 July, 2017. However, you will still be able to make concessional contributions. 
  • Work Test over 65 to continue: The Government will retain the existing requirement that you must meet a work test to be able to contribute to super between ages 65 and 74 (they had originally proposed to remove this requirement).
  • Catch Up Contributions: The catch-up super option won’t start until 1 July, 2018 rather than 1 July, 2017. From 1 July 2018, individuals will be able to make concessional contributions (tax deductible contributions) above the annual cap, where they have not fully utilised their concessional contribution cap in previous financial years. This measure is limited to individuals with a super balance of less than $500,000.
  • Tax Offset for spouse contributions: The income threshold for a spouse tax offset goes from $10,800 to $37,000 and phases out at $40,000. Here, the maximum tax offset available is $540, when a spouse contributes $3,000 or more to their low-income spouse’s super account, provided that he or she is doing some paid work.

Although the changes mentioned above are still not legislated, most of the commentary out of the Press Gallery seems to suggest that Labor will pass these changes. The recent changes lean towards a positive movement in the superannuation industry and can restore some confidence to the Australian people.

For advice regarding your superannuation, contact YML today to arrange an appointment with one of our specialists.

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