The superannuation changes announced in the Federal Budget, have now been passed by Parliament and will become effective on 1 July 2017. Below is a summary of the key changes potentially affecting Super SA schemes and products. 

This article was produced in conjunction with IFS Financial Planners. If you need more personalised advice around these changes and their impact to you, please contact IFS to make an appointment.

 

New contribution cap of $25,000 for all taxed schemes/products 

Super SA schemes/products affected: Super SA Select and SA Ambulance Service Super Scheme

From 1 July 2017, the current annual concessional contributions (employer and salary sacrifice contributions) cap of $30,000 for those aged under 50 - or $35,000 for those over 50 – will be lowered to $25,000 for all individuals. The cap will index in line with wages growth.

This change affects all taxed super funds including Super SA Select and SA Ambulance Service Superannuation Scheme.

The change does not affect Triple S, Pension Scheme, Lump Sum Scheme, Parliamentary Scheme and Judges’ Scheme. However, the amount of concessional contributions made to these schemes will be counted towards the cap if a member of any of these schemes also contributes concessional contributions to a taxed super fund.

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For more information, see the Treasury fact sheet

 

$100,000 annual cap for non-concessional contributions

Super SA schemes/products affected: All schemes and products

From 1 July 2017, an annual cap of $100,000 on non-concessional contributions (member after-tax contributions) will replace the current $180,000 cap. Prior to this date the bring-forward rule can still be utilised, and amounts up to $540,000 can be contributed (if the bring-forward rule has not already been triggered). If the bring-forward rule has been triggered in 2016-17 and not fully utilised then it can be used in 2017-18 and 2019 but with the lower amount of $380,000 ($180,000 + $100,000 + $100,000).

From 1 July 2017, individuals with a total super balance above $1.6 million will no longer be able to make non-concessional contributions, except where required to do so as part of a defined benefit scheme such as the Pension Scheme, Lump Sum Scheme, SA Ambulance Service Superannuation Scheme and Parliamentary Scheme, where after-tax contributions are required.

All after tax contributions into any superannuation or rollover fund will be counted.

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For more information, see the Treasury fact sheet

 

Low Income Superannuation Tax Offset retained

Super SA schemes/products affected: Super SA Select

A tax offset that provides a super savings boost of up to $500 a year for those earning up to $37,000 has been retained. The Low Income Superannuation Tax Offset (LISTO) will replace the existing Low Income Superannuation Contribution (LISC) from 1 July 2017. The LISC was previously scheduled to expire on 30 June 2017.

For more information, see the Treasury fact sheet

 

New $1.6 million cap on money you can put into retirement phase

Super SA schemes/products affected: Super SA Income Stream

From 1 July 2017, there is a $1.6 million cap on the total amount of superannuation savings that can be transferred from a concessionally taxed ‘accumulation account’ to a tax-free ‘retirement account’. Superannuation savings accumulated in excess of the cap can remain in an accumulation superannuation account, where the earnings will be taxed at 15 per cent. Those individuals already in retirement as at 1 July 2017 with balances in excess of $1.6 million will need to either transfer the excess back into an accumulation superannuation account; or withdraw the excess amount from their superannuation. Individuals who think they may be affected by this new measure should consider seeking financial advice.

It’s worth noting that subsequent earnings on balances in the retirement phase will not be capped or restricted.

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Lifetime Pension also count towards the $1.6 million retirement cap.

Super SA schemes/products affected: Pension Scheme, Parliamentary Scheme and Judges’ Scheme

From 1 July 2017, any lifetime pension will count towards the $1.6 million retirement cap. The amount counted towards the cap will be 16 times the total annual pension amount on 1 July 2017 or when the pension commences after this date. If you are over the $1.6M cap then you will not be required to commute the lifetime pension (and you may not be able to do this under the rules of the scheme) however, if you have other retirement accounts (eg the Super SA Income Stream) these accounts will need to be reduced by the excess amount.

 

Tax Rebate for Untaxed Lifetime Pensions

Super SA schemes/products affected: Pension Scheme, Parliamentary Scheme and Judges’ Scheme

From 1 July 2017, if the sum of your lifetime pensions are over $100,000 (ie you are over the $1.6M cap when you times your annual pension income by 16) the 10% tax offset will not apply to any pension amount over $100,000. For example if your annual pension is $110,000 (consisting of $102,000 untaxed and $8,000 tax-free components) you would currently be receiving a 10% tax offset of $10,200. Individuals who think they may be affected by this new measure should consider seeking financial advice. 

 

For more information, see the Treasury fact sheet

  

New catch-up measure for those with balances of $500,000 or less

Super SA schemes/products affected: Super SA Select and SA Ambulance Service Super Scheme

From July 1 2017, members with total superannuation balances of $500,000 or less will be able to rollover their unused concessional cap amounts (now set annually at $25,000) for a period of five years. This measure – which means that those who qualify can make larger super contributions than $25,000 in some years, where they have “unused caps” over the five year period - has been designed to provide more flexibility for those who can make extra contributions and assist those returning to the workforce.

For more information, see the Treasury fact sheet

 

Changes to Transition to Retirement (TTR)

Super SA schemes/products affected: Super SA Income Stream

Effective 1 July 2017, the tax exempt status of investment income from assets supporting transition to retirement (Early Access to Super - EATS) income streams will be removed, meaning that the investment earnings on TTR pensions will be taxed at up to 15%. This change will apply irrespective of when the transition to retirement income stream commenced. Individuals will also no longer be allowed to treat certain superannuation income stream payments as lump sums for tax minimisation purposes.

Investors who have invested in the Super SA Income Stream as part of an Early Access to Super or Transition To Retirement arrangement are encouraged to seek financial advice.

Pension payments are still concessionally taxed and are tax free for individuals over 60. Once retired, regular superannuation income streams will retain their tax free earnings status.

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For more information, see the Treasury fact sheet

 

Division 293 tax for those with incomes of $250,000 or more

Super SA schemes/products affected: All schemes and products

Individuals with incomes over $250,000 will now be required to pay an additional 15% tax on their concessional super contributions.  The threshold was previously $300,000.  To be liable for a total of 30 per cent tax, a person would need to have at least $250,000 in combined income and concessional superannuation contributions.  In 2017/18, approximately 1% of fund members are expected to pay Division 293 taxation.  This change will also be reflected in defined benefit schemes.

For more information, see the Treasury fact sheet

 

Extension of the spouse tax offset

Super SA schemes/products affected: All schemes and products

From 1 July 2017, the eligibility rules for claiming the tax offset for superannuation contributions that partners make to their low income spouses will be extended. The current 18 per cent tax offset of up to $540 will be available for any individual, whether married or de facto, contributing to a recipient spouse whose income is up to $37,000. This is an increase from the current $10,800. As is currently the case, the offset is gradually reduced for income above this level and completely phases out at income above $40,000. Individuals will be able to make contributions on behalf of their spouse who is under age 75.  

For more information, see the Treasury fact sheet.   

 

Anti-detriment rule abolished

Super SA schemes/products affected: Super SA Flexible Rollover Product, Super SA Income Stream and SA Ambulance Service Super Scheme

From 1 July 2017, Anti-detriment payments will be abolished. An anti-detriment payment is an amount that can be included when a lump sum death benefit is paid to a dependant. The payment is a refund of the 15 per cent tax on contributions that has been paid by the deceased member over their lifetime.

 

This article is current as at 12 April 2017.