There have been a number of changes during the last 12 months that are particularly relevant to superannuation funds and self funded retirees. Some of the changes that have been introduced and may affect you from 1 July 2017 are as follows:
Introduction of the ‘$1.6m cap’
The government has legislated an upper limit on the amount that each individual can have in a superannuation pension account and the earnings remain tax free. The limit has been set at $1.6m from 1 July 2017, and will be indexed. Amounts in superannuation pension accounts in excess of this $1.6m limit, can remain in superannuation, but earnings on these amounts will be taxed at 15%. Where a superannuation fund has members with a balance over $1.6m, the fund is allowed adjust the cost base of the assets to reduce the impact of the changes on any future capital gains. The cap applies to the total of the superannuation balances for an individual irrespective of whether they are spread over a number of different funds.
Concessional superannuation contributions cap reduced
The annual concessional contributions cap has been reduced to $25,000 for each member regardless of age. Prior to this date the cap was $30,000 for a person under 50 and $35,000 for a person 50 & over.
Non-concessional contributions cap reduced and criteria introduced
The annual non-concessional contributions cap has been reduced from $180,000 to $100,000 for each member. In addition, the member must have less than $1.6m in superannuation in order to make non concessional contributions. The 3 year bring forward contribution rule remains in place.
TRIS (Transition to Retirement) Pensions
Earnings on a Super Fund supporting TRIS will be subject to tax at 15%. The same cost base adjustment for Capital Gains Tax applies to this provision. Previously the earnings were not subject to taxation.
There are a number of options to consider & planning opportunities prior to 1 July 2017.
For example, an individual can earn up to $18,200 tax free. $18,200 is the general tax free threshold that applies to all people who are residents of Australia for tax purposes. There may be an opportunity to move investments from the Superannuation Fund environment to your own personal name and utilise the tax free threshold. In addition, if a person qualifies (eligibility criteria – your age and the level of income) for the Seniors and Pensioners Tax Offset (SAPTO) a single person can earn $32,279 and a couple can potentially earn as much as $57,948 before you are required to pay Australian income tax.
However, to withdraw funds from your Superannuation Fund you need to meet the conditions of release to access your member benefits. Examples of these are:
- Reaching the age of 65
We recommend that you contact your MSI representative if you are uncertain of the impact on your affairs.