Budget Super Changes

Many of the changes to super announced in the 2016 Federal Budget have now been passed. Here, we set out the changes and what they may mean for you.

If you’re approaching retirement or have already retired:

Introducing a general transfer balance cap from the accumulation phase to the retirement phase

There will be a $1.6 million cap on the total amount that can transferred from the accumulation phase to the pension phase (that is, to purchase a pension). The transfer balance cap will be indexed in line with CPI.

Effective – 1 July 2017

What this means for you:

If you’re opening a tax-free pension account, you can only transfer up to $1.6 million from an accumulation account.

If your total super balances are greater than $1.6 million, the excess can remain in your accumulation account.

If you’re a current pension member who has more than $1.6 million in your pension account, on 1 July 2017 you will need to transfer any amount over $1.6 million back into an accumulation account (such as Accumulation Advantage or Retained Benefits). Alternatively, you can withdraw the excess amount as a lump sum. If you have a balance between $1.6 million - $1.7 million on 30 June 2017, you will have 6 months from 1 July 2017 to bring your retirement phase balance to below $1.6 million

Introducing a personal transfer balance cap for pension accounts

Each member will have a personal transfer balance cap which is the maximum amount they can transfer to a retirement account.

Effective – 1 July 2017

What this means for you:

Your personal transfer balance cap will be equal to the general transfer balance cap at the time you start a retirement pension. This is the maximum amount that you can transfer into the pension phase. If you do not use all of your personal transfer balance, the remaining personal transfer balance will be indexed proportionally in line with the general transfer balance cap.

If you exceed the cap you will be required to commute the excess and pay tax on the earnings on the excess. Note that the cap does not apply to the balance of your pension, for example, subsequent earnings growth are not included when determining your cap.

WISPs

The tax exemption of earnings from transition to retirement income streams will be removed (investment earnings will attract 15% tax – the same as accumulation account earnings).

Effective – 1 July 2017

What this means for you:

If you have a WISP account, investment earnings will be taxed at 15%.

We’re here to help

If you need to set up an accumulation account or have questions about the changes, call Member Services on 1800 757 607.

If you’d like to review your retirement income strategy, talk to one of our financial planners or click here to book an appointment online.

If you want to know how much you have in your pension account, log in to Member Online and check your balance.

If you’re working or saving for retirement:

Concessional contributions cap reduced

The annual concessional contribution cap will reduce to $25,000 for all members (currently $30,000 for those aged under 50 and $35,000 otherwise).

Effective – 1 July 2017

What this means for you:

Regardless of your age, your employer’s super contributions plus any salary sacrifice contributions you make need to be less than $25,000 per year if you don’t want to exceed your cap and pay additional tax.

Unused concessional cap carry forward

You can make additional concessional contributions by bringing forward unused concessional contribution cap amounts from the previous 5 financial years, provided that your super balance just before the financial year is less than $500,000.

Effective – 2019/20 financial year

What this means for you:

If you have less than $500,000 in super and you haven’t used your $25,000 concessional contribution cap in one or more of the previous 5 years, you can make catch-up concessional contributions (carrying forward payments from the previous 5 years).

Non-concessional contribution caps reduced

The non-concessional cap will reduce to $100,000 (from $180,000) – this is four times the annual concessional contributions cap of $25,000.

Effective – 1 July 2017

What this means for you:

If you’d like to make after-tax contributions to your super, keep in mind that you can only contribute up to $100,000 each year without having to pay additional tax.

If your total account balance is $1.6 million or more, you cannot make non-concessional contributions.

Bring-forward amount for non-concessional contribution caps reduced

The bring-forward amount will reduce to $300,000 (from $540,000).

Effective – 1 July 2017

What this means for you:

If you’re under 65, you can bring forward 3 years’ worth of non-concessional contributions to a maximum of $300,000. If your super account balance is $1.6 million or more, you cannot bring forward any non-concessional contributions.

If you have already triggered the bring-forward rule, you may still be able to contribute up to $540,000 before 30 June 2017. If you have not brought forward the full amount before 1 July 2017, the amount you can bring forward will be adjusted for the new contribution caps.

Deduction of personal contributions

The requirement to earn less than 10% of income from employment for a tax deduction on personal contributions will be removed.

Effective – 2017/18 financial year

What this means for you:

Individuals will be able to apply for a tax deduction for personal contributions made to the fund. If you’re under 75, you can apply for a tax deduction for personal contributions made to your super - you no longer have to be self-employed to be eligible to do this. These amounts will be taxed in the fund at 15% and count towards your concessional contribution cap.

Low Income Super Tax Offset (LISTO)

The Low Income Super Tax Offset (LISTO) will replace the LISC (low income super contribution) and provide up to $500 a year for those earning less than $37,000.

Effective – 2017/18 financial year

What this means for you:

If you earn less than $37,000 a year and make concessional contributions to your super, you will continue to receive up to $500 from the Government.

High income earners - Division 293 income threshold reduced

The threshold for high income earners on concessionally-taxed contributions will reduce to $250,000 (from $300,000).

Effective – 1 July 2017

What this means for you:

If you earn more than $250,000 per year (including concessional contributions), you’ll have to pay (Division 293) tax on your concessional contributions. This is an additional 15% tax on top of your 15% contributions tax, which brings it to a total of 30% tax on concessional contributions.

Tax offset for spouse contributions

The amount a person’s spouse can earn will increase for eligibility for the spouse tax offset.

Effective – 1 July 2017

What this means for you:

Your spouse can now earn more and still be entitled to the spouse tax offset – they can earn up to $40,000 to receive up to $540. Your spouse must be under 70, and if they’re aged between 65-69, they will need to meet the ‘work test’*.

* The ‘work test’ requires people to have been gainfully employed for at least 40 hours in a consecutive 30-day period.

We’re here to help

If you’re interested in making additional contributions for you or your spouse, or wish to learn more about claiming a tax deduction, call Member Services on 1800 757 607.

If you’re unsure about the most effective contribution strategy for you, talk to one of our financial planners or click here to book an appointment online.

If you want to know how much you have in your pension account, log in to Member Online and check your balance.