New Super Regulations – a Quick Summary
You have probably received a lot of information relating to the above, however I thought it a good idea to articulate these new rules as simply and concisely as I can – remember you are always more than welcome to contact me should anything not be clear to you or if you would like to discuss further as admittedly I have just touched the surface.
Superannuation Guarantee rate at 9.5%
Superannuation Guarantee (SG) rates have not changed for the 2016/2017 year and remain at 9.5%.
No increase in tax on super fund investment earnings
Super fund investment earnings are taxed at 15 per cent in accumulation phase, this has not changed. Investment earnings on assets in pension phase remain tax free – however from 1 July 2017 the government has imposed a cap on the value of assets that you may take into pension phase, and that transfer balance cap is $1.6 million.
Note if you expect to have more than $1.6 million of super in pension phase as at 1 July 2017, you will need to act before July 2017 to ensure you do not breach this cap.
The bad news for TRIS (transition to retirement income stream) recipients is that from the 1 July 2017, the government has removed the tax-exempt status of earnings supporting a transition-to-retirement pension (TRIP).
Concessional contributions caps change from 1 July 2017
For the 2016/2017 year, the concessional contributions caps (this is the before tax contributions) have not changed. If you’re aged 48 years or under on 30 June 2016, then your concessional cap is $30,000 for the 2016/2017 year. If you’re aged 49 years or over on 30 June 2016, your cap is $35,000 for the financial year.
From 1 July 2017, the concessional cap is reduced to $25,000 for all ages, however from 1 July 2017, the 10% rule will no longer apply and all employees will be able to make tax-deductible contributions
For the 2016/2017 financial year, the 10% rule still applies.
The abolishment of the 10% rule is good news and opens up a new tax planning opportunities which has not been readily available to employees.
Some further good news is that From 1 July 2018 onwards, if you fail to use your annual concessional contributions cap of $25,000, you can then carry forward the unused portion for up to 5 years, provided your total superannuation balance is under $500 000.
Non-concessional (after-tax) contributions caps change from July 2017.
For the 2016/2017 year, the non-concessional contributions caps have not changed. The annual NCC cap remains at $180,000, and if you’re under the age of 65, you can bring forward 2 years’ worth of contributions, which means you can make up to $540,000 in NCCs in one financial year. From 1 July 2017, the annual NCC cap will drop to $100,000 and the maximum bring forward has dropped to $300,000.
However, from 1 July 2017, individuals with a superannuation balance of more than $1.6 million will no longer be eligible to make non-concessional contributions at all.
Tax-free super benefits for over-60s
If you’re aged 60 years or over, you can still receive your super benefit payments tax-free, this has not changed.