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Superannuation – Where is it now?

Clive Todd

November 2016

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Major Budget Announcements Cutting the concessional contribution cap

to $25,000 per year

Introducing a superannuation transfer balance cap of $1.6 million on the amount of superannuation an individual can transfer into pension phase

Implementing a lifetime cap of $500,000 for non-concessional contributions (NCC)

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Ceasing the tax exemption on earnings for assets supporting Transition to Retirement Income Streams

Removing the “work test”: so all individuals can contribute up until the age of 75

Increasing access to concessional contributions allowing employees to make personal concessional contributions

Lowering the income limit to $250,000 for the extra contributions tax

Allowing catch-up of concessional contributions Delayed

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Except catch-up concessional contributions which will be effective from 1 July 2018

Effective 1 July 2017:

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What didn’t change?

Tax-free withdrawal for over 60’s

Maximum tax rate on earnings still 15%

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What is happening to non-concessional contributions? Annual limit reduced to $100,000 from 1 July

2017 “Bring forward” rule available for under 65’s

No NCC once Total Superannuation Balance (TSB) is $1.6 million

Current limits of $180,000 remain for 2017 financial year

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Non-Concessional ContributionsTSB on 30 June

2017Non-concessional contributions cap for the first year

Bring forward period

Less than $1.4 million

$300,000 3 years

$1.4 million to less than $1.5 million

$200,000 2 years

$1.5 million to less than $1.6 million

$100,000 No bring forward period, general non-

concessional cap applies

$1.6 million or more Nil N/A

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Transfer Balance Cap (TBC) Draft legislation introduces 23 new

definitions

Available capacity tracked via Transfer Balance Account (TBA)

$1.6m limit a member can transfer into a tax-free pension

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Transfer Balance Cap (TBC) (Cont) If cap exceeded then notional earnings

taxed Excess can remain in accumulation

TRIS’ don’t count

Will be indexed (but apportioned if already used)

CGT Relief will apply to amount converted to accumulation

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When will we see it? Passed the House of Reps (22/11/2016)

Enshrining “Objectives of Superannuation” in legislation delayed until February 2017

Passed the Senate (23/11/2016)

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Labor’s Proposed Super Policy Reduce annual NCC limit to $75,000

Extra contributions tax to apply to people earning over $200,000

Don’t support: Carry forward of concessional contributions Removal of 10% rule

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Practical Results of Changes

Many Transition to Retirement Income Streams will cease

Focus on meeting “retirement” condition of release

Equalising of member balances Non-concessional contributions Contributions splitting

Maximum NCC to be made prior to 30 June 2017

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Increase in Limited Recourse Borrowing Arrangements

Administrative burden

Greater emphasis on planning and restructuring

Small business CGT concessions unchanged – making it even more valuable

More insurance outside of super

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DisclaimersThis document contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgement. It does not purport to be comprehensive or to render professional advice. The reader should not act on the basis of any matter contained in this publication without first obtaining specific professional advice.

We believe that the statements made by us in this document are accurate but no warranty of accuracy or reliability is given. Our conclusions are based on interpretations of accounting standards and other relevant professional pronouncements and legislation current as at the date of this document. Should the interpretations, accounting standards, other relevant professional pronouncements or legislation change, our conclusions may not be valid. We are under no obligation to update the matters considered in this document after its publication.

© Hanrick Curran, November 2016All rights reserved

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