Morning, below is a summary of the changes to the budget relating to super. This being the area of most change. Remember these changes are not yet legislated and mostly will not come into force until 1 July 2017.
None of the changes suggest you should remove any money from super. It will continue to be more tax effective to have super as your savings structure rather than assets in your own name; just not as tax effective as it was.
1. Div 293 tax – the threshold for this tax, which is an extra 15% tax on contributions made, has been reduced from the current $300k to $250k. It reduces (but does not eliminate) the tax savings of making contributions for higher earners. The tax savings being the difference between the top tax rate and 30%.
2. Concessional contributions – the caps will be reduced to $25k pa (currently $30k and $35k depending on age) from 1/7/2017. From this date those with balances under $500k will have the opportunity to carry forward some unused caps for five years.
3. Work test – this is to be abolished from 1/7/2017, great news as it means we can utilise non-working spouses caps more easily.
4. Transition to Retirement Pensions – the lovely TRP strategy for those over 55 but not yet retired won’t work after 1 July 2017 as the earnings within the fund will be taxed at accumulation rates. So enjoy for the next year while it lasts and then we will look at rolling the balances back into accumulation phase. It will generally still be better tax wise than having investments in your own name, subject to your other income.
5. The Non concessional cap – (currently $180k p.a.) will be reduced to a lifetime limit of $500k. This limit starts today. Don’t panic if you have already contributed over $500k, you are not going to have to take it out or be taxed on it, it just means you can’t put in any further non-concessional amounts.
6. Pension Limits – the amount transferred into pension phase will be capped at $1.6m from 1 July 2017. So if you have a pension bigger than this already, we will need to roll some of it back into super by 1 July 2017 (the later the better).
7. Small Business Concessions – no changes to this, so it looks as though if you sell a business and retire we will still be able to contribute those funds to super in addition to the concessional and non-concessional caps above. (Subject to the CGT lifetime limits already in place)
That is pretty much all the important areas covered, so lets see what actually gets legislated and then we can adjust those long term plans.