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Superannuation – Where is it now?

Clive Todd

September 2016

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Major Budget Announcements Cutting the concessional contribution cap

to $25,000 per year

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

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

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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

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Except non-concessional lifetime cap which came into effect 3 May 2016;

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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When will we see it? First tranche released 7 September 2016

Enshrining : “objectives of superannuation” Removal of “work test” Removal of 10% rule Introduction of Low Income Superannuation

Tax Offset More contentious changes to be released later

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Tweaks to lifetime NCC cap Exemptions from cap of “life events”

Life events include divorce & damages payout

not inheritances or lotto wins

Contributions needed to settle contracts entered into prior to 3 May 2016 to be exempted

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Lift cap to $750,000 and leave it backdated to 1 July 2007

Or

Keep it at $500,000 but make it prospective

No mention of overseas pension transfers

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Any other possible changes?

Probably not

$1.6 million pension cap unlikely to be changed

Big funds pushing to keep anti-detriment payment but unlikely

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Labour’s Proposed Super Policy $500,000 lifetime NCC cap to apply

prospectively from 3 May 2016

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

Not supporting: Carry forward of concessional contributions Removal of work test 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

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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, September 2016All rights reserved

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Any questions?

Thank you

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