Transfer balance cap: From July 1 there will be a $1.6 million transfer balance cap on the amount of superannuation one can transfer into the tax-free retirement phase. Savings above this limit can remain in accumulation (where tax is 15%) or can be removed from the super environment. Earnings on the balances in retirement phase will not be capped or restricted.
Taxation of concessional superannuation contributions: the threshold at which high income earners pay additional contributions tax will be lowered from $300,000 to $250,000. The annual cap on concessional (before–tax) superannuation contributions will also be lowered to $25,000.
Lowering the annual non–concessional contributions cap: the annual non–concessional contributions cap will be lowered to $100,000 and individuals with a balance of $1.6 million or more will no longer be eligible to make non–concessional contributions.
New Low Income Superannuation Tax Offset (LISTO): the Low Income Superannuation Contribution (LISC) is replaced with the Low Income Superannuation Tax Offset (LISTO). This essentially refunds tax paid on concessional contributions made by those with an income up to $37,000 – up to a cap of $500. This means low income earners avoid the situation where they pay more tax on super contributions than on their take home pay.
Improving the integrity of transition to retirement income streams: tax exempt status will be removed from earnings coming from assets supporting transition to retirement income streams. These earnings will now be taxed concessionally at 15 per cent. This change will apply regardless of when the transition to retirement income stream commenced.
Improving access to concessional contributions: all individuals under the age of 65, and those between 65 to 74 who meet the work test, can claim a tax deduction for personal contributions to eligible superannuation funds up to the concessional contributions cap.
Catch–up concessional contributions: From 1 July 2018, people with a balance of less than $500,000 will be able to ‘catch–up’ superannuation contributions by carrying forward unused concessional cap space (for up to 5 years). This will assist people who have taken time off work or have additional money they didn’t in previous years ie. finished paying a mortgage.
Extending the spouse tax offset: Individuals with spouses who have incomes up to $10,800 can currently receive a tax offset up to $540 for making contributions to their spouse. The spouse income limit eligibility will be lifted from $10,800 to $40,000.
The government has also attempted to ensure all future changes in superannuation are consistent with its objectives. So the government has legislated the primary objective of superannuation as
“to provide income in retirement to substitute or supplement the Age Pension”.
In the future, any bill or regulation relating to superannuation must be accompanied with a statement of compatibility. Maybe this is window dressing, but hopefully it will pump the brakes on the consistent tinkering we’ve seen in recent years.
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.