The key changes proposed for superannuation:
1. Introducing a lifetime cap for non-concessional contributions
You will need to determine if your NCCs made since 1 July 2007 equal or exceed $500,000. If they do then you cannot contribute further NCCs to your fund and if you have exceeded the cap you do not need to withdraw the excess NCCs. If you haven’t reached the cap of $500,000 as at 3 May 2016, then you can continue to make NCCs up to the cap. If you then exceed the cap, you will need to withdraw the excess NCCs or face a penalty tax. If you do not have this information, these records may be able to be obtained from the ATO. The lifetime cap limit removes the current $180,000 annual cap and the bring forward rule. The cap will be indexed in $50,000 amounts in line with wages.
2. Lowering the concessional contribution cap to $25,000 for all individuals
3. Lowering the threshold of Division 293 tax
4. Introducing a $1.6 million superannuation transfer balance cap
5. Removing the tax-free treatment of assets supporting transition to retirement income streams
There are a number of other proposed superannuation changes that may affect you from 1 July 2017. These changes are:
- Allowing catch-up concessional contributions — people who have balances under $500,000 will be able to carry forward any unused concessional contributions caps on a rolling 5 year basis.
- Tax deductions for personal superannuation contributions — all Australians under the age of 75 will be able to claim an income tax deduction for personal contributions made to their superannuation funds. Currently, this type of deductible contribution is generally available only to self-employed people.
- Harmonising contribution rules for those aged 65 to 74 — people will no longer have to meet the work test before making concessional and non-concessional contributions to their super fund if they are aged from 65 to 74 (including making contributions for a spouse aged under 75).
- Improving superannuation balances of low income spouses — the eligibility rules for low income spouse superannuation tax offset will be extended by raising the threshold from $10,800 to $37,000.
- Introducing a Low Income Superannuation Tax offset (LISTO) — the LISTO will replace the current Low Income Superannuation contribution (LISC) to ensure that people with adjusted taxable income up to $37,000 do not pay higher tax on their super contributions than their take-home pay.
- Removing the anti-detriment provision — super funds will no longer be able to use these provisions to increase a death benefit paid to certain death benefit beneficiaries on the basis of refunding contributions tax paid by the deceased fund member throughout their life.