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What you need to know

What you need to know

By Andrew Proebstl

Finance 


After cuts to superannuation concessions passed last year many of the new rules will take effect from July. On 23 November last year, after months of negotiation and amendment the federal government succeeded in having significant changes to superannuation passed by parliament. Most changes come into effect on 1 July 2017, and include the following: Annual cap on concessional contributions From 1 July 2017, the annual cap on concessional contributions will be lowered to $25,000 per annum, down from its current rate of $30,000 for those aged less than 50 years and $35,000 for those aged 50 and over. Catch-up concessional contributions From 1 July 2018 (not 2017 as previously indicated by government), those with total superannuation balances of $500,000 or less will be able to make catch-up concessional superannuation contributions, subject to unused concessional contribution caps being carried forward on a rolling basis for up to five years. For those earning more than $250,000 From 1 July 2017, those with more than $250,000 of income and superannuation contributions (adjusted for other benefits) will pay an additional 15 per cent tax on their concessional contributions on those super contributions that exceed the $250,000 threshold. Tax deductions for contributions From 1 July 2017, the government will improve the flexibility of the superannuation system so that more Australians can utilise their concessional contributions cap by allowing people under 75 to claim an income tax deduction for personal superannuation contributions to an eligible fund. Personal contributions for which a tax deduction is claimed will count towards the concessional contributions cap. However, to take advantage of this change, people aged between 65 and 74 will need to first satisfy a work test. $100,000 annual non-concessional contributions cap From 1 July 2017, the current annual non-concessional contributions cap of $180,000 will be reduced to $100,000 per annum. However, superannuation fund members still have until the end of the current financial year to take advantage of the current $180,000 non-concessional contribution cap. Members under 65 also have until the end of this financial year to consider taking advantage of the “bring-forward rule” which allows up to three years’ of non-concessional contributions to be made in the one year. Transition to retirement (TTR) pensions From 1 July 2017, the government will remove the tax exemption on investment earnings of TTR pensions and they will be taxed at 15 per cent (as is the case for investment earnings on superannuation assets). This change will apply regardless of when the TTR commenced. $1.6 million superannuation transfer balance to retirement products cap From 1 July 2017, the government will introduce a $1.6 million cap on the total amount of superannuation an individual can transfer into retirement products, which includes superannuation pensions. The cap will apply to current retirees and those who have yet to enter retirement Current retirees with more than $1.6 million in retirement products (including superannuation pensions) have until 1 July 2017 to either remove the excess or return it to an accumulation superannuation account, where 15 per cent earnings tax applies or 10 per cent if capital gains. Snapshot: Most changes to superannuation will come into effect on 1 July 2017. The federal government believes most Australians will be better off or unaffected by the changes. Now is a good time to top up your super to take advantage of existing tax concessions. Andrew Proebstl is chief executive of legalsuper, Australia’s super fund for the legal community. He can be contacted on ph 9602 0101 or via aproebstl@legalsuper.com.au.

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