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The Government’s superannuation changes take effect from 1 July 2017 and represent the biggest shake-up to the superannuation system in the past 10 years. The changes mean there is a last chance opportunity to act before 30 June 2017 to maximise superannuation contributions before the new legislation takes effect. Following we take a look at the changes to the super contributions caps that may impact you.

NO MORE NON-CONCESSIONAL CONTRIBUTIONS WHERE YOUR SUPER BALANCE EXCEEDS $1.6 MILLION

Non-concessional contributions are after-tax personal contributions for which you cannot claim an income tax deduction. Commencing 1 July 2017, where you have more than $1.6 million in super at 30 June of the prior year, you will be unable to make any non-concessional superannuation contributions.

Take Away – If your super balance is likely to be more than $1.6 million on 30 June 2017, now until 30 June 2017 represents your final opportunity to make non-concessional contributions into your superannuation fund.

REDUCED NON-CONCESSIONAL CONTRIBUTIONS CAP

If your super balance is less than $1.6 million at 30 June 2017, you can still make non-concessional contributions but your annual cap will be reduced from $180,000 p.a. to $100,000 p.a. from 1 July 2017.

Take Away – There is no change to the 2016/2017 cap. Therefore the current $180,000 per year cap (or  $540,000 three-year, bring forward cap) continues to apply until 30 June 2017.  This represents another final opportunity to maximise your superannuation balance.

TRANSITIONAL RULES AFFECTING BRING FORWARD CAP

The reduced $100,000 annual cap means that from 1 July 2017, the three-year bring forward cap will be reduced to $300,000 of contributions over three years. However transitional rules restricting the level of your future year contributions may apply where you have triggered the bring-forward rule in either 2015/2016 or 2016/2017.

Take Away – If you have already triggered your bring forward cap, you may like to consider using up your entire $540,000 current bring-forward cap in 2016/2017 so that the transitional rules do not apply.

REDUCED CONCESSIONAL CONTRIBUTIONS CAP

Concessional contributions include:

• Employer contributions (including the compulsory 9.5% Superannuation Guarantee (SG) and salary sacrifice) and
• Personal contributions claimed as a tax deduction.

From 1 July 2017, the concessional contributions cap will be reduced to $25,000 for all taxpayers.  Currently (in 2016/2017) the cap is $30,000 (or $35,000 for taxpayers aged over 49). The reduced $25,000 cap will also impact those employees who salary sacrifice.

Take Away – If you are currently eligible to claim a deduction for your personal contributions (most employees are not eligible until 1 July 2017), you may wish to consider bringing forward any planned contributions to before 1 July 2017 to take advantage of the larger cap. From 1 July 2017, you may also need to review the amount you are sacrificing to superannuation to ensure you do not exceed the reduced $25 000 concessional cap. The annual cap is per person (not per superannuation fund).

If you have any questions on how these proposed changes will impact you or what opportunities they may create, please contact our SMSF Specialist, Kellie Powell, either by phone on (07) 3808 4499, by email on [email protected], or in person.  This article contains general advice and has not been tailored to your personal circumstances and may not be suitable for your circumstances. Please seek personal financial and tax advice prior to acting on the information.

 

Kellie Powell is a Director at PT Partners