From 1 July 2017, the largest changes to superannuation in 10 years will come into effect.
These changes could provide you with opportunities and threats to your retirement plans.In this article, I will provide an overview of the changes and outline how you might benefi t or be affected by the coming change in legislation.
A $1.6 million transfer balance cap is being introduced from July 1. This means that any individual has a lifetime cap of $1.6 million which they may transfer to a tax-effective pension.
Once the cap is used, the opportunity to move more funds into pension is lost.The non-concessional contribution cap will be reduced from $180 000 p.a. to $100 000 p.a. and the opportunity to use the bring-forward provision is restricted if your superannuation balance is over $1.4 million.
The concessional contribution cap will be reduced to $25 000 p.a. The cap is currently $30 000 p.a. for people under 50 and $35 000 p.a. for those over 50.
This may mean that you will need to reassess your current transition to retirement or salary sacrifi ce arrangement to avoid a breach of the cap
.The division 293 tax threshold is being reduced from $300 000 to $250 000. This means that an extra 15 per cent tax on certain concessional contributions will apply if your adjusted income exceeds $250 000.
Currently earnings on transition to retirement pensions are tax-free.
From July 1, 2017 earnings within a transition to retirement pension will be taxed at 15 per cent.Anti-detriment payments will be abolished for lump sum death benefits from July 1, 2017.
This may mean that you will need to update your estate plan.
Catch-up concessional contributions for people with a superannuation balance of less than $500 000 will be available.
This means that following the rule change, any unused concessional contributions from previous years may be able to be carried over resulting in an increase in the cap available to you.
The 10 per cent test will be removed from July 1, 2017, meaning employees will be able to claim a tax deduction for concessional contributions where previously only a salary sacrifice strategy would be available.
This will allow a greater level of flexibility over the current rules.Spouse contribution offset is being raised from $13 800 to $40 000.
This will extend the eligibility of the offset to couples where one spouse earns less than $40 000 p.a.
The benefit of this strategy is that a person contributing on behalf of their spouse can claim a tax offset of up to $540.
THE IMPACT ON YOU
As these changes are coming into effect on July 1, it is important that you act quickly to determine if the tightening of the superannuation rules will affect you.
Please contact your financial adviser for more advice.
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