Significant changes to contribution limits to super could prove a challenge

The changes to super and tax laws proposed in this year’s federal budget, then revised and adjusted by the government in September, have been passed through Parliament and are mostly due to take effect from July 1, 2017. That means that you have until July to consider if there is any action you should take to make the most of current super rules or to comply with the upcoming changes.

We take a look at some of the key changes in the table below.

Significant super reforms

Now New*
No limit on funds moved into tax-free pension phase. $1.6 million transfer balance cap on super transferred to the tax-free retirement income phase.
You can contribute $180,000 of after-tax earnings to super each year (or $540,000 for those eligible to bring forward two years of contributions). Reduction in annual after-tax contributions cap to $100,000 (or $300,000 if bringing two years of contributions forward, if eligible). Clients with balances of $1.6 million or more, just before the start of the financial year, cannot make after-tax contributions.
Annual concessional (before-tax) contributions limit of $30,000 (or $35,000 if aged 50 or over by June 30, 2017). Reduction in the annual concessional (before–tax) contributions cap to $25,000. This applies regardless of age.
Unused concessional contributions caps are lost. Catch-up concessional contributions may be available for those with balances less than $500,000 just before the start of the financial year.
If income from employment is less than 10% of total income, you can claim a tax deduction for personal super contributions. Clients under age 65; or age 65-74 who satisfy the work test, can claim a tax deduction for personal super contributions.
Additional 15% tax on certain concessional contributions if your adjusted income exceeds $300,000. Additional 15% tax on certain concessional contributions, if your adjusted income exceeds $250,000.
Earnings on transition-to-retirement super pensions are tax free. No earnings tax exemption on transition-to-retirement super pensions. Earnings will be taxed at up to 15%.
Anti-detriment payments may apply on certain lump sum death benefits (generally a notional refund of contributions tax to be paid on death). No anti-detriment payments on lump sum super death benefits (no refund of contributions tax paid on death).
Offset for contributions to spouse’s super (if spouse earns under $13,800). Offset for contributions to spouse’s super (if spouse earns under $40,000).
The ‘low-income super contribution’ refunds tax (up to $500) on concessional contributions for those earning $37,000 or less. Introduction of the low-income super tax offset (effectively a continuation of the low income super contribution).

*These measures start July 1, 2017, except for the catch-up concessional contribution measure which starts July 1, 2018.

If you are concerned about how you may be impacted, now is the time to talk to your financial adviser so you have time to review your superannuation and retirement plan, before the changes take effect.

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