Reduction in the non-concessional contribution cap
The annual non-concessional contribution cap will be reduced to $100,000 from 1 July 2017. Along with the reduction in the annual non-concessional cap the three-year bring forward cap will also be reduced to $300,000. Importantly, individuals with account balances in excess of $1.6 million unable to make non-concessional contributions post 1 July 2017. Consequently it may be prudent for eligible individuals to maximise their non-concessional contributions pre 30 June 2017. Please contact us should you wish to discuss your options in this regard.
1.6 Million Transfer Balance Cap
1 July 2017 will see the introduction of a superannuation transfer balance cap. The $1.6 million cap represents the maximum amount that an individual can transfer into a pension phase. The cap applies to both individuals currently in receipt of a pension and individuals planning to commence a pension in the future. It is worth noting that the cap will be indexed to CPI in $100,000 increments.
Individuals who currently have a pension account(s) in excess of $1.6 million will need to ensure any excess is commuted back to accumulation phase (amounts in accumulation phase are subject to 15% tax on associated earnings), or withdrawn from their Fund before 1 July 2017. The Government has recently provided guidance on their preferred method for ensuring superannuation members and Trustees who currently have a pension account(s) in excess of $1.6 million meet the new standards. We are currently working with affected Trustees in this regard however if you wish to contact us to discuss your particular circumstance please do so.
Reduction in the concessional contribution cap
From 1 July 2017, the concessional contribution cap will be $25,000. The $25,000 applies to all individuals irrespective of age or superannuation balance. This represents a reduction of $5,000 from the current general cap of $30,000 and a reduction of $10,000 from the over-50s cap of $35,000. It may be prudent for eligible individual to maximise their applicable concessional cap pre 30 June 2017.
Transition to Retirement Pensions
Transition to retirement pensions can still continue post 1 July 2017 however the associated tax exemption for fund earnings on the assets supporting these pensions will be removed. Importantly there has been no change to the tax treatment of the pension paid to the associated member. That is, individuals aged 60 and over will continue to receive their pension payments tax free, whilst individuals aged under 60 will need to add the taxable portion of their pension payment to their assessable income. Due to the removal of the tax exemption associated with these pensions some members may wish to stop said pensions at 30 June 2017. If you are in receipt of a transition to retirement pension and wish to discuss your options please contact us.
The Government has introduced capital gains tax (CGT) relief measures to ensure members who are required to commute, or partially commute their current pensions to comply with the new $1.6 million pension cap are not disadvantaged. This CGT relief will also apply to members effected by changes to transition to retirement pensions. These measures aim to preserve the tax exemption for accrued gains on selected assets by resetting the cost base on said assets to their current market value.
The CGT Relief measures are not automatic and can be quite complicated with alternate methods applied for segregated and unsegregated Funds. It is worth noting that the majority of the work involved in relation to the CGT relief will be formalised in conjunction with the completion of your Funds 2017 annual accounts. In this regard we work with you to ensure you achieve the best outcome for your individual circumstance.
Australian Taxation Office contacting Trustees directly
Finally it has come to our attention that the ATO have commenced a general mail out directly to some super fund members and trustees regarding the new super changes. If you receive this or similar correspondence and would like to discuss it or receive further information please contact us.