On 27 September 2016 the Government changed their mind again and released further draft legislation which will change a number of the superannuation announcements in the 2016 Federal Budget.
Most of these changes will apply from 1 July 2017 so now is the time to start planning on how to manage your superannuation and whether not the impact will require a change in direction for your planned superannuation goals.
Included in the latest legislation were amendments relating to:
- Restricting the amount that can be held in a superannuation pension to $1.6 million. This has been called the transfer balance cap, the terminology reflects the intention that this cap will be tested at the commencement of the pension. The cap places a limit on the amount an individual can hold in pensions that enjoy the tax-free exemption any excess held in superannuation will be taxed at 15% or 10% for capital gains held longer than 12 months. This is due to be implemented from1 July 2017.
- Concessional contributions cap will be limited to $25,000 per year for all taxpayers and this will apply from 1 July 2017.
- The income threshold at which individuals are required to pay an additional 15 per cent contributions tax on contributions will drop from $300,000 per year to $250,000. This change is proposed to apply from 1st July 2017.
- Some concession has been given to provide greater flexibility for those with broken work patterns by allowing individuals with balances of less than $500,000 to ‘carry forward’ unused annual concessional cap on an accumulating balance for up to five years. At this stage this proposal is to commence 1st July 2018.
- Transition to retirement income or pension streams from superannuation currently enjoy a tax exemption on the earnings they make in the superannuation fund. This exemption will be removed for these types of pension and taxation will revert to the current rate of 15% and 10% for capital gains for investments held for longer than 12 months. This is at superannuation fund level. The pensions will still remain taxable to the individual under 60 years of age. This change is set to occur on 1st July 2017.
This will most likely be the case if you have a superannuation balance of over or close to $1.6 million, were planning on making significant contributions to superannuation in the next few years, are a high income earner or have a transition to retirement pension in place now.
How can we help?
If you are concerned that the Government’s changes to superannuation are going to affect you, please feel free to give me a call to arrange a time to meet so that we can discuss your particular requirements in more detail.