The main superannuation changes from 1 July 2017 are:

  • From 1 July 2017 rental property owners will be unable to claim a tax deduction for travel expenses related to their rental property. Unfortunately this includes all travel costs eg. to inspect the property
  •  A reduction in the concessional contribution limit to $25,000;
  • Greater flexibility for deductible contributions and a concessional contributions catch up scheme;
  • A reduction in the yearly non-concessional contribution cap to$100,000 and (if eligible) a new bring forward amount of $300,000;
  • Changes to the tax exemption on earnings for transition to retirement (TTR) pensions; 
  • Spouse super contribution rebate eligibility extended; and
  • A new transfer balance cap of$1.6m collect rent, perform repairs, collect replacement items or meet with a property manager/tenant.

Changes to concessional contributions

From 1 July 2017 the cap on concessional contributions (sum of employer and personal deductible contributions) is reducing from the current $30,000 (or $35,000 for those over 49) down to a flat cap of
$25,000.

Greater flexibility for superannuation contributions

From 1 July 2017 all members will be entitled to make tax deductible contributions up to the concessional contribution cap. The 10% rule (which restricted personal contributions if an individual was receiving employment income with super support that was 10% or more of their total income) will be removed.

Accordingly individuals will be able to top up their concessional super contributions eg. if an employer contributes $10,000 of superannuation for an employee for the year then the employee might consider contributing up to $15,000 (ie. the $25,000 contribution cap less $10,000 employer contribution) into super and claim this amount as a personal tax deduction.

Additionally if a member’s total super balance (of all funds) is less than $500,000 at 30 June in the prior year, they may make catch up contributions for any unused concessional contributions from 1 July 2019. This could be really useful for members who plan to realise a large capital gain in a particular year or have highly variable annual taxable incomes. Remember super contributions may be locked away for some time and any tax advantages need to be considered against personal cash flow and accessibility to super issues.

Changes to non-concessional contributions

From 1 July 2017 the non-concessional contribution (NCC) cap has been reduced to $100,000 (or a maximum bring-forward amount of $300,000, subject to being less than 65 years of age and bring forward transitional rules).

The bring-forward rule allows those less than 65 years of age to bring forward the next two years’ worth of non-concessional contributions. It is triggered in a year where you contribute more than the current year NCC limit.

For those less than 65 the NCC transitional arrangements allow for NCC caps of $460,000 if the bring-forward rule is triggered in the 2015/16 year and $380,000 if triggered in the 2016/17 year. Where the bring-forward rule has not been triggered in the 2013/14, 2014/15 or 2015/16 years there is a limited opportunity for a bring forward contribution of up to $540,000 prior to 30 June 2017.

Remember triggering the bring-forward rule sets the maximum NCC contributions for the current and next two financial years. Further, don’t forget that contributions include the payment of fund expenses by a member.

Importantly members with more than $1.6m in super are ineligible to make additional non-concessional contributions.

Changes to the tax exemption on earnings for transition to retirement (TTR) pensions; 

From 1 July 2017, the government will remove the tax-exempt status of earnings from assets that support a TTR pension (pensions paid to members aged between 55 and 65 years of age who are not retired). Earnings from assets supporting a TTR pension will be taxed at 15% regardless of the date the pension commenced.

Additionally super income stream payments may no longer be treated as lump sums for taxation purposes.

Spouse rebate eligibility widened 

From 1 July 2017 eligibility for the 18% spouse super contribution rebate (a rebate of up to $540 where you make a non-concessional super contribution for your spouse) has been extended through the spouse’s income threshold increasing from $10,800 to $37,000 (shading out at $40,000).

$1.6m pension transfer balance limit

The $1.6m transfer balance limits the total superannuation savings that can be transferred from accumulation phase into a “tax-free retirement account”. An individual’s transfer balance account (TBA) identifies how much an individual has used of their transfer balance cap. It is not transferable (eg. to a reversionary beneficiary); each person has their own TBA. Amounts that are credited towards (counted in) an individual’s TBA are the:

  •  value of all super interests the member has in pension phase on 30 June 2017;
  •  commencement value of new super pensions;
  •  value of reversionary pensions at the time the individual becomes entitled to the; and
  •  excess transfer balance earnings that accrue on excess TBAs.

TBAs are not effected by investment gains or losses or pension payments; however a member’s transfer balance account is debited (dollar for dollar) when they commute (partially or fully) the capital of a pension. Where a member exceeds their TBC they may either:

  •  remove the excess from the superannuation system (commute the excess); or
  •  maintain the excess within super but in accumulation phase (thereby subject to 15% tax on earnings and 10% on capital gains held for more than 12 months).

Please contact our office with any accounting or taxation questions. 

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2017 Superannuation Changes

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