Final tranche of draft Super Legislation released
About the author:
- Author name:
- By Terri Bradford
- Job title:
- Head of Wealth Management
- Date posted:
- 24 October 2016, 7:45 AM
The Federal Government has released the final tranche of draft legislation for the superannuation reforms. The legislation was released over three separate tranches which gives you an idea of the enormity of the changes.
The hotly debated $500,000 non-concessional contribution lifetime cap has been scrapped and replaced with an annual limit of $100,000 (or $300,000 under 3-year bring forward rules).
The $1.6 million Pension Transfer Balance Cap proposal also provided much debate. This particular cap restricts the total amount of super an individual can transfer into a pension. Retirees with balances above $1.6m as at 1 July 2017 will be required to reduce their balance by transferring any excess back to accumulation or withdrawing the amount from super.
There is a question mark on whether super providers will be able to upgrade their systems before 1 July 2017 to accommodate all of the requirements of the super reform legislation if not passed soon.
A quick summary of the reforms follows below:
Concessional Contributions
Reducing the annual limit to $25,000 per annum regardless of age. Effective from 1 July 2017.
Personal Deductible Super Contributions
Ability for those under age 75 to claim a tax deduction for personal super contributions regardless of their employment arrangement. Effective from 1 July 2017.
High Income Earners Super Tax
The high income earners 'super tax' income threshold will reduce from $300,000 to $250,000 per annum. Effective from 1 July 2017.
Non-Concessional Contribution Limits
A cap of $100,000 per annum per person will apply, or $300,000 using the 3-year bring forward rule. If the individual's super balance is $1.6 million or greater then no further non-concessional contributions can be made. Effective from 1 July 2017.
Catch-up Concessional Contributions
The 'catch-up' concessional contributions measure will allow unused concessional contribution caps to be carried forward on a rolling basis for up to five consecutive years where an individual's account balance is $500,000 or less. Effective from 1 July 2018.
Transition to Retirement (TTR) Pensions
The tax exempt status of earnings supporting a TTR pension will be removed. Earnings within the pension will be taxed at 15%. Effective from 1 July 2017.
Pension Transfer Balance Cap
A $1.6 million transfer balance cap on the total amount of super an individual can transfer into retirement accounts will apply. Effective from 1 July 2017.
Low Income Super Tax Offset
The contributions tax is refunded where a person earns less than $37,000 per annum. Effective from 1 July 2017.
Low-Income Spouse Tax Offset
The spouse income threshold increases to $37,000 per annum. Effective from 1 July 2017.
Other
The Anti-Detriment payments from superannuation death benefits will be abolished. Effective from 1 July 2017.
If you want to discuss your current superannuation strategy, contact your Morgans adviser.
Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents ("Morgans") do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.