The budget super reforms have now passed the senate and only require royal assent to become law, which is thought to be a mere formality.
The major changes are as follows
- Introducing a $1.6 million transfer balance cap which limits the amount that can be transferred to the retirement phase, where earnings are tax-free. This measure will also apply to death benefit income streams.
- Reducing the non-concessional contribution cap to $100,000 pa (or $300,000 under the bring forward provisions), limiting the ability to make NCCs to people who have a total superannuation balance of less than $1.6 million and introducing transitional rules for those who triggered the bring forward rule prior to 1 July 2017.
- Removing tax exempt earnings for transition to retirement income streams.
- Lowering the income threshold for Division 293 tax to $250,000.
- Reducing the concessional contributions cap to $25,000 for all taxpayers.
- Introducing a concessional contributions catch-up regime for those with total super balances of less than $500,000 from 1 July 2018.
- Allowing a deduction for personal contributions without testing the proportion of employment income received (the 10% test).
- Introducing a low income superannuation tax offset to replace the low income superannuation contribution (which will be abolished from 1 July 2017).
- Increasing the annual income threshold from $10,800 to $37,000 for eligibility for the spouse contribution tax offset.
- Abolishing the anti-detriment payment.
We will be in touch with our clients that will be affected by the pension cap and changes to existing transition to retirement pensions soon to discuss available options.
I will post a series of blog updates running through the changes in more detail. However if you have any questions please don’t hesitate to call.
One thing to consider now is if you have the means to contribute $540k as a non-concessional contribution, the 2016/17 year is your last opportunity to this before the caps are lowered (note conditions apply).
Lindsay 0413 952 180