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Preparing for the July 1 Superannuation changes

Superannuation  |  18/04/2017  |   10 min read

The superannuation changes announced in the 2016 Federal budget are due to take effect on July 1 this year. That only leaves you two months to prepare. Read on to make sure you’ve taken the necessary steps to protect your income and benefits.

For more details and expert advice please join Equip at an upcoming Retirement Ready Expo in your city. You’ll be able to hear from superannuation and financial planning professionals about the upcoming changes, and how these may impact your retirement. Events are taking place in early May at venues in Sydney, Brisbane, Adelaide, and Melbourne.

 

  Employer Contribution Caps will reduce

Current rules  

You can contribute up to $30,000 annually (or $35,000 for those aged 50 or more), in pre-tax income to your super. 

New rules

You can contribute up to $25,000 annually in pre-tax income to your super. 

Checklist

These changes impact older members’ ability to top-up their super ahead of retirement. If you fall outside the new limit after July 1 you should consider other ways to top-up your super. This may mean additional non concessional (after tax) contributions.

If you’re salary sacrificing and your total contributions exceed the new limits you may also need to reduce your salary sacrificing.

 

  a new $1.6 million pension cap will be introduced

Current rules  

There are no limits on how much money can be parked in a pension account. Any investment earnings are untaxed if you’re aged 60 or over.

New rules

A maximum $1.6 million can be transferred into a superannuation pension account. Amounts over the cap will need to be held elsewhere, and investment earnings may be taxed. 

Checklist

If you have a pension account with a balance exceeding $1.6 million, you will need to move excess funds into alternative accounts. This may be a standard superannuation accumulation account, or a bank savings account. In either case, investment earnings may be taxed.

These changes also apply to members’ with defined benefit accounts, although balances are calculated differently. We strongly recommend speaking to a financial planner to understand your options, and the impact of any changes. 

 

 

  The super contribution Caps will reduce

Current rules  

There is an $180,000 annual limit on (after tax) contributions to your super. Up to three years’ worth of contributions can be brought forward for a combined $540,000 in contributions.

New rules

The annual limit will be reduced to $100,000, and the amount you can bring forward will reduce to $300,000. 

Checklist

If you’re in a position to make a substantial contribution you need to do some before the July 1 limits come in to effect. Speaking to a financial planner can help you understand how this affects a broader retirement strategy including your mortgage, tax rate, and superannuation asset test.

 

  transition to Retirement pension will lose its tax exemption

Current rules  

Designed to help people aged 55-64 transition into retirement with part time work, a Transition to Retirement Pension (TRP) provides tax free investment earnings. 

New rules

Investment earnings from a Transition to Retirement Pension will be taxed at 15%. People will no longer be able to use a TRP as a tax minimisation tool.  

Checklist

If you have a TRP we recommend speaking with a financial planner to understand the changes and how they may impact your tax obligations and retirement preparation.

 

  The Spouse income limit will increase

Current rules  

If your spouse earns less than $13,800 annually any contributions you make to their super come with an 18% tax offset (up to $540).

New rules

The income threshold for the spouse receiving contributions will increase to $40,000. 

Checklist

If you’re contributing to a spouse’s superannuation, you may be eligible for $540 tax offset. The income threshold for this has significantly increased.

 

  High income earners will face higher tax bills

Current rules  

Australians who earn over $300,000 a year are taxed 30% for super contributions (rather than the standard 15%). 

New rules

The new laws reduce the income threshold to $250,000, and means more (high income) Australians will be paying the higher tax rate from July 1.

Checklist

If you’re earning over $250,000 annually you may benefit from speaking with an accountant or financial planner about your income and tax obligations.

 

 

For more details and expert advice please join Equip at an upcoming Retirement Ready Expo in your city. You’ll be able to hear from superannuation and financial planning professionals about the upcoming changes, and how these may impact your retirement. Events are taking place in early May at venues in Sydney, Brisbane, Adelaide, and Melbourne.

 

This information is provided for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice. Before making a decision to invest in the Equipsuper Superannuation Fund, you should read the relevant Equip Product Disclosure Statement (PDS). Past performance is not an indication of future performance. Issued by Equipsuper Pty Ltd ABN 64 006 964 049 AFSL 246383. 

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