Super Budget changes, not so super

On 16th September 2016, the government clarified how the proposed budget changes of Super will work, this draft legislation has been issued and is preparing us for what you need.

For Non concessional contributions, (NCC), being after tax contributions: example lump sum contributions from sale of investment property or in-specie contribution of a personal portfolio prior to retirement, or otherwise used for re-investment of previous year’s pension.

Up until 30/06/2017, if no contributions greater than the annual limit of $180,000 were previously made, you were allowed to contribute $180,000 per annum or the 3-year rule of $540,000, if under age 65.

As of 1/07/2017, the annual limit reduces to $100,000 pa which affects the 3-year limit for those under age 65, that is available for contribution, being now limited to $300,000, or as per the applicable transitional limits.

We recommend that anyone considering a lump sum non-concessional contribution to their Super Fund to meet with us personally and discuss this strategy in more detail and how the transitional limit applies for their case.

For concessional contributions, (CC), being contributions that are made to Super which receive tax concessions, being the ability to reduce taxable income, via employer as in Salary Guarantee and Salary Sacrifice or as self-employed, being personal concessional contributions.

The limits for those under age 49 as at 30 June 2014 were $30,000, and otherwise $35,000.  As of 1 July 2017 these will be significantly reduced for everyone, being limited to only $25,000 pa.

As of 1 July 2018, further legislation is being drafted which will allow for rolling 5 year periods to allow you to use up to the $25,000, not previously used for further contribution in order to increase your concessional contribution amount.

The Work Test still applies, it was under consideration of being scrapped for contributions over age 65, however this did not occur.  The Work Test is still required for members over age 65, being 40 hours of bonafide employment or self-employment in a 30-day period at the time of contribution to Super.

The Transition to Retirement benefit will no longer apply for members who are in a TTR and accessing their Super funds; the benefit being the tax free treatment of their funds in Super, which will end as at 30/06/2017.  Members can continue to access a pension, however their pension will not be in a tax free status until it is put in pension phase when they are retired past preservation age or at age 60.

The $1.6M balance for funds in pension phase limit has been legislated to be as of 1/07/2017.  So that as of this date all balances greater than this amount will be required to be rolled out of the pension phase, rolling back to accumulation, taxed at 15% or otherwise outside Super which may attract a higher tax, dependent on individual marginal tax rates.  It is worth noting that currently the first $20,542 of taxable income outside Super is tax free.

Centrelink is also changing their method of Assets Testing as of 1 January, 2017, and will be of particular interest to clients currently accessing a partial age pension, which may be significantly affected.

Planning for ALL these changes and how they will affect you is important to help you understand how these changes can affect your current retirement strategy and how you can re-formulate your next retirement strategy within the legislated changes, to gain the best advantage of financial planning for your success.

We urge you to lodge your interest in our breakfast seminar when we will discuss these elements that require review and planning. Please contact us at (08) 9481 0746 and we will inform you of our next session.

See you at our next meeting,

Christine Ferguson, Senior Financial Planner
Christine Ferguson, Senior Financial Planner


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