On Wednesday 23 November 2016, both Houses of Parliament passed two superannuation bills which included the proposed superannuation reforms outlined in the 2016 Federal Budget and subsequent changes released in September 2016.
The two bills, The Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 and the Superannuation (Excess Transfer Balance Tax) Imposition Bill 2016 will now go to the Governor-General’s office to receive Royal Assent.
The bills include the following reforms to superannuation laws:
|New Rules||Existing Rules||Date of Effect|
|Concessional contribution cap will be reduced to $25,000 for all individuals regardless of age.||Concessional contribution caps:
||1 July 2017|
|Contributions to constitutionally protected super funds will count towards the concessional contribution cap.||These contributions are excluded from the cap, therefore allowing a member to also contribute to another fund.||1 July 2017|
|The “10% test” to claim a tax deductible personal concessional contribution has been removed.||Restriction on individuals receiving more than 10% of assessable income from employment activities making personal concessional contributions.||1 July 2017|
|Introduction of “catch-up” concessional contributions over 5 years (for individuals with superannuation balance of less than $500,000).||Currently no similar measures are in place.||1 July 2018|
|The non-concessional contribution cap will be reduced to $100,000 for all individuals under the age of 75.||$180,000 non-concessional contribution cap for all individuals under the age of 75.||1 July 2017|
|Restriction on Individuals with total superannuation balances in excess of $1.6 million (as at prior year end) to make non-concessional contributions.||Currently no similar restrictions are in place.||1 July 2017|
|Introduction of a $1.6 million cap on the transfer of individuals superannuation balances from accumulation to pension phase.||Currently no similar restrictions are in place.||1 July 2017|
|Removal of the tax-free status of income earned on assets supporting Transition to Retirement Income Streams.||Currently the earnings on assets supporting Transition to Retirement Income Streams are tax-free in line with other pension income streams..||1 July 2017|
|Division 293 Tax|
|Reduction of the Division 293 tax income threshold to $250,000.||Current Division 293 tax income threshold is $300,000.||1 July 2017|
|Introduction of a Low Income Superannuation Tax Offset to replace the Low Income Super Contribution.||A Low Income Super Contributions of up to $500 for individuals earning up to $37,000,||1 July 2017|
|Increase the threshold to claim the Low Income Spouse Contribution Tax Offset to $40,000.||Current Low Income Spouse Contribution Tax Offset threshold is $13,800.||1 July 2017|
|Removal of the anti-detriment provisions.||Currently anti-detriment provisions can be applied for payments of deceased members superannuation entitlements to beneficiaries.||1 July 2017|
The changes outlined above (most of which will be effective from 1 July 2017) will impact individuals in a number of different ways; in some cases, new planning opportunities may be available, in others doors may be closed.
In either case you may be required to take action prior to 30 June 2017, particularly in the following situations:
- You have more than $1.6M in superannuation
- You plan to make a large once-off contributions into superannuation within the next 12 months;
- You currently (or are planning to) draw a Transition to Retirement Income Stream;
- You currently (or are planning to) draw a Defined Benefit Income Stream.
To discuss the changes and potential strategies that may be available for you, please contact your local William Buck advisor.