The government announced on Thursday that it would be changing some of the new superannuation contribution rules that were announced in the May budget.
Here are the main points:
1. Scrapping the proposed $500,000 lifetime limit for non-deductible super contributions
2. From 1 July 2017, if you have a transition to retirement pension, this will no longer mean that part of the income in the super fund is tax-free – the fund's earnings will be taxed at 15% until a full pension starts
3. From 1 July 2017, people under 65 or those between 65 and 74 who are "working" will be eligible for a tax deduction for personal super contributions up to $25,000 per year
For people with less than $1.6m in super:
1. From 1 July 2017 a new cap of $100,000 per year for non-deductible contributions will apply (up to 30 June 2017 the limit is $180,000)
2. If you are under 65 you can still contribute up to 3 years' worth of non-deductible contributions in one year (currently up to $540,000 of contributions can be made in one year, this will reduce to $300,000 on 1 July 2017)
3. If you are aged between 65 and 74 you can only make super contributions if you are "working"
4. From 1 July 2017, you won't be able to make non-deductible contributions to your super account if the balance of all your super accounts is more than $1.6m
5. The proposal to allow you to make extra deductible super contributions under a catch-up rule if your super balance is under $500,000 has been delayed until to 1 July 2018
For people with more than $1.6m in super:
1. From 1 July 2017, only $1.6m (indexed) of your current super balances will be eligible for tax-free pension status – the rest of your super will need to be in a non-pension account with earnings taxed at 15%, or withdrawn from super with earnings taxed at ordinary rates (up to 49%).
2. From 1 July 2017, you won't be able to make non-deductible contributions to your super account if the balance of all your super accounts is more than $1.6m
There are lots of planning opportunities that we can use to maximise your retirement savings prior to 1 July 2017. Please contact us if you would like to discuss your options.
The Macro Group Team