Superannuation update - Possible superannuation changes

By Brad Twentyman - March 17, 2016

This update summarises actions you should consider given the possibility of the Government making changes to current superannuation rules in the foreseeable future.

Possible Changes

We’ve heard very little thus far about specific plans or changes to the superannuation system, but given media commentary and the government’s own statements in the public arena, it is appearing more likely that there may be a move to reduce or limit some of the tax concessions in the current superannuation system.  

Our expectation is if changes were made with the effect of reducing tax concessions, superannuation would still continue to be taxed at lower rates compared to alternative investment structures, and clients should therefore continue to consider superannuation in their broader planning decisions.

Timing

If changes are made, they could commence at any time. Traditionally, Governments have not sought to apply superannuation changes retrospectively. Taking action earlier may mean that more options are available to you, and it may also mean that existing rules continue to apply to your circumstances.

Below, we outline in more detail some possible changes that government may seek to make, and the corresponding actions you should consider.

Contribution Planning

The Government may seek to reduce allowable contribution limits, possibly impacting on future contribution plans.  

If you are planning or considering future contributions at or around current contribution limits, it may be worth considering if those plans can be bought forward.  

Current contribution limits are outlined below.  

Concessional Contributions Limit for 2015/2016

Age on 30 June 2015 Limit
Under age 49 $30,000
49 years and over $35,000

Non-Concessional Contributions Limit for 2015/2016

Age at any time in the financial year Limit
Under age 65 $180,000*
Age 65 but less than 75 $180,000**

*Individuals aged under 65 at any time in the financial year can ‘bring forward’ contributions of up to three times the standard non-concessional contribution limit across a fixed 3 year period, that is, $540,000 over a three-year period.

**Individual must be gainfully employed for a minimum of 40 hours in any consecutive 30 day period during the financial year

Access Rules

The Government may seek to reduce or limit access to the capital in superannuation funds, possibly by limiting the ability to start drawing on super as a pension.

Under current rules, it is possible to commence drawing on super as a pension upon attaining your preservation age (55 and above, as per the table below).  On commencement of a pension, the fund must pay a minimum pension amount each year, and when commencing on the basis of having attained preservation age, a maximum annual pension amount also applies.

If the Government does remove the ability to access super on attaining preservation age, access would be limited to permanent retirement or at age 65.  It is possible the Government may also increase the standard access age from age 65 to age 67 to align with age pension rules.

If you were planning on accessing your super on or around your preservation age, it may be worth considering commencing access earlier.

There are eligibility and tax issues that would need to be worked through before making a decision to access. You may trigger a net tax saving or a net tax cost on starting a pension, depending on individual circumstances.

Preservation Age

Date of Birth Preservation Age
Before 1 July 1960 55 Years
1 July 1960 – 30 June 1961 56 Years
1 July 1961 – 30 June 1962 57 Years
1 July 1962 – 30 June 1963 58 Years
1 July 1963 – 30 June 1964 59 Years
On or after 1 July 1964 60 Years

Further information

Please ask your regular Pitcher Partners contact or any of the contacts in the Pitcher Partners firms below for options that may be available to you or more information on the issues raised.


Contact our experts


Other articles


 

Top of Page







IN THIS SECTION:


Rob Southwell

Sydney

Managing Partner and Partner – Private Clients Group


> View profile

John Brazzale

Melbourne

Partner and National Chairman


> View profile

Michael Minter

Newcastle

Managing Partner


> View profile

Bryan Hughes

Perth

Chairman


> View profile

Tom Verco

Adelaide

Managing Principal - Private Clients


> View profile

Ross Walker

Brisbane

> View profile



Partnership fraud

SUCCESS

Paperwork and independent advice saves partnerships from fraud

Discover more

Kia Ora Horse Stud

CASE STUDY

Pitcher Partners fills a Financial Manager gap to keep the business on track

Discover more

Fuel Injection Company Administration

LEADERSHIP

A fuel injection company began life as an Australian public company before being acquired by a UK publicly listed company while in the research and development stage of a “green...

Discover more



@PitcherPartner What are your goals for 2018? Why not look at a Master of Entrepreneurship and Innovation? https://t.co/3iYi1h42sG