Reduced concessional contributions caps (i.e. deductible)
With effect from 1 July 2017, concessional contributions will be restricted to $25,000 per annum, irrespective of your age (currently $30,000 for those aged under 50 and $35,000 for those aged over 50).
From 1 July 2017, for those individuals with super balances of less than $500,000 who have not maximised their concessional contributions cap, they will now be able to carry forward "unused cap amounts" over a 5 year rolling basis to allow a catch up on contributions.
Removal of "10% rule" for deductible personal contributions
From 1 July 2017, individuals up to the age of 75 (increasing from 65) will have the ability to claim a deduction for personal superannuation contributions irrespective of their work circumstances. Previously, individuals looking to claim a deductible personal contribution needed to ensure that their employment income was less than 10% of their overall taxable income, however this change removes this condition. Personal contributions do form part of the concessional contributions cap of $25,000, effective from 1 July 2017.
Increase in age and removal of "work test"
From 1 July 2017 the age at which individuals have to satisfy the "work test" has increased for those under 65 to 75 years allowing these individuals to make concessional contributions irrespective of their working arrangements.
Transition to retirement income streams
The ability to access the zero per cent tax rate for Transition to Retirement Income Streams will be removed from 1 July 2017. Rather, income in the fund will be taxed at the normal 15% rate. The rule that allows individuals to treat certain superannuation income stream payments as lump sums for tax purposes will also be removed.
Reduced threshold for Division 293 tax
From 1 July 2017 the threshold for when Division 293 tax will apply, will be reduced to $250,000 (currently $300,000).
Division 293 tax is a tax levied on an individual's taxable concessional contributions above the $300,000 threshold ($250,000 from 1 July 2017) at the rate of 15%. Effectively, the rate at which tax applies to concessional contributions above the $300,000 threshold increases from 15% to 30%.
$1.6 million maximum pension account balances
The Government has announced that from 1 July 2017 it will restrict the amount an individual can transfer from an accumulated superannuation balance into a tax free pension phase to $1.6 million. Earnings on the assets transferred to pension under this cap will continue to be tax free.
Individuals can continue to accumulate amounts in excess of $1.6 million and continue to access the concessional tax rate on earnings at 15%.
The $1.6 million cap will be indexed in $100,000 increments in line with CPI.
Existing pension balances
Individuals who are in pension phase as at 1 July 2017 will need to remedy their pension balance by either:
- Transferring the excess back into an accumulation superannuation account to reduce the pension account balance to $1.6m by 1 July 2017; or
- Withdraw the excess amount from their pension account.
The result of not remedying the excess will be to have the excess above the $1.6 million cap treated similar to excess non-concessional contributions, with a penalty tax applying.
Subsequent fluctuations in pension accounts due to market value changes, income etc. will not affect the pension balance (i.e. the $1.6 million is assessed at the time the pension is commenced).