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The Federal Government has been consulting on draftnlegislation to give effect to most of its 2016–2017 budget superannuationnproposals. Here are some of the key changes.
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Deducting personal contributions
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All individuals up to age 75 will be able to deduct personalnsuperannuation contributions, regardless of their employment circumstances. Ofncourse, such deductible contributions would still effectively be limited by thenconcessional contributions cap of $25,000, proposed from 1 July 2017.
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Pension $1.6 million transfer
nbalance cap
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The total amount of accumulated superannuation an individualncan transfer into retirement phase (where earnings on assets are tax-exempt)nwill be capped at $1.6 million from 1 July 2017. Those with pensionnbalances over $1.6 million at 1 July 2017 will be required to “roll back”nthe excess amount to accumulation phase by 1 July 2017 (where it will bensubject to 15{256a07afe6cf75b7e23500f37551d0affdf8bab65b8226b57f0b6b9aa6c8fc70} tax on future earnings).
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Concessional contributions cap
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This cap is to be reduced to $25,000 for all individualsn(regardless of age) from 1 July 2017. The concessional cap will be indexed innincrements of $2,500 (down from $5,000 increments). Contributions to constitutionallynprotected funds and untaxed or unfunded defined benefit superannuation fundsnwill be counted towards an individual’s concessional contributions cap.nHowever, any excess concessional contributions in respect of such funds willnnot be subject to tax, but instead limit the individual’s ability to makenfurther concessional contributions.
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Note that the Government has decided to:
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• ndump the proposed $500,000 lifetime cap onnnon-concessional contributions (which would have been backdated to 1 July 2007)n– instead, the lifetime cap will be replaced by a reduced non-concessional capnof $100,000 per year for individuals with superannuation balances below $1.6 million;
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• nnot proceed with the proposal to remove the workntest for making contributions between ages 65 and 74; and
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• ndefer to 1 July 2018 the start date for catch-upnconcessional contributions for superannuation balances of less than $500,000.
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TIP:nThe government says it intends to introduce the proposed changes in Parliamentn“before the end of the year”. It remains to be seen if the changes will passnsmoothly through Parliament. In any case, it would be prudent to check in withnyour professional adviser to see if and how the proposed changes would affectnyour retirement savings strategy.
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Important: Clients should not act solely on the basis of the material contained in Update. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. This update is issued as a helpful guide to clients and for their private information.