How will new superannuation laws impact you?
Yes, after months of debate of debate and a federal election we finally have some certainty on Superannuation. On November 23, superannuation legislation was passed by both houses of parliament. Major reforms include:
- Introducing a $1.6 million cap on the amount of capital that can be transferred to, or retained in the tax-free earnings retirement phase of superannuation (referred to as the “transfer balance cap”). Please note that defined benefit pensions will also count towards the transfer balance cap, based on a formula.
- Removing tax exempt earnings for Transition to Retirement income streams
- Reducing the annual concessional (before tax) contributions limit from $30,000 for under 50’s and $35,000 for over 50’s to $25,000 for everyone.
- Allowing deduction for personal contributions without testing the proportion of employment income received (the “10% test”).
- Reducing the non-concessional (after-tax) contributions limit from $180,000 p.a. to $100,000 p.a. for those with super balances under $1.60m. If using the bring-forward rule the limit reduces from $540,000 to $300,000 over a 3 year period.
- Reducing the threshold at which high-income earners pay an additional 15% tax (Division 293 tax) on their concessional contributions to superannuation from $300,000 to $250,000.
Other proposed changes include:
- Introducing the Low Income Superannuation Tax Offset (LISTO) to refund tax paid on concessional contributions for those with taxable income less than $37,000;
- Allowing catch-up concessional contributions (from July 2018);
- Extending the spouse tax offset; and
- Abolishing the anti-detirement payment.
Most changes won’t come into force until July 2017 or later, giving us all time to digest the reforms and put in place strategies that optimise existing and future planning opportunities. FMD still strongly believes that superannuation offers many benefits for savers and retirees and we will work with you to ensure we make the most of the positive changes and minimise the impact of the negative changes.
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General advice disclaimer: This article has been prepared by FMD Financial and is intended to be a general overview of the subject matter. The information in this article is not intended to be comprehensive and should not be relied upon as such. In preparing this article we have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained on this article to particular circumstances. FMD Financial, its officers and employees will not be liable for any loss or damage sustained by any person acting in reliance on the information contained on this article. FMD Group Pty Ltd ABN 99 103 115 591 trading as FMD Financial is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977. The FMD advisers are Authorised Representatives of FMD Advisory Services Pty Ltd AFSL 232977. Rev Invest Pty Ltd is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977.