From July 1st 2017 a number of superannuation changes originally proposed in the 2016-2017 Federal Budget took place. The changes are positive overall, improving the equity, efficiency and sustainability of super tax concessions.
The changes include:
First home super saver scheme
On 5 December 2017, the First Home Super Saver Tax Bill 2017 was passed by the parliament, allowing for the establishment of the First Home Super Saver Scheme.
From 1 July 2018 individuals will be able to apply to withdraw voluntary contributions made to super after 1 July 2017 for a first home deposit.
Up to $15,000 of voluntary contributions made in a single financial year can count towards the amount that can been withdrawn up to a maximum amount of $30,000 of personal contributions plus associated earnings.
Concessional contributions and earnings that are withdrawn will be taxed at marginal rates less a 30 per cent offset.
Introduction of a transfer balance cap
A $1.6 million cap was introduced on the amount that can be transferred to super in retirement phase when earnings are tax-free. Additional savings can remain in an accumulation account (where earnings are taxed at 15 per cent) or remain outside super. This came into effect on 1 July 2017 and will be indexed in following years. Retired people with retirement phase income streams between $1.6 and $1.7 million on 1 July 2017 will have 6 months from 1 July 2017 to bring their balances under $1.6 million without penalty. If your retirement phase income streams (transfer balance) remains in excess of the transfer balance cap on 1 January 2018, you may have to pay excess transfer balance tax.
Concessional superannuation contributions cap reduced
The annual concessional contributions cap was reduced to $25,000 (from $30,000 p.a. for those aged under 49 at the end of the previous financial year and $35,000 p.a. otherwise).
Concessional superannuation contributions tax threshold reduced
The threshold at which high-income earners pay Division 293 tax on their concessionally taxed contributions to superannuation was reduced from $300,000 to $250,000 p.a.
Non-concessional contributions cap reduced and criteria introduced
The annual non-concessional contributions cap was reduced from $180,000 to $100,000 p.a. In addition, criteria for an individual to be eligible for the non-concessional contributions cap was introduced and other minor amendments to the non-concessional contributions rules were made.
Low Income Superannuation Tax Offset to replace the Low Income Super Contribution
The Low Income Superannuation Tax Offset (LISTO) replaced the Low Income Superannuation Contribution (LISC) from 1 July 2017. The LISTO refunds up to $500 of the tax paid on concessional super contributions for low-income earners with a taxable income of up to $37,000 p.a.
Greater deductibility of personal contributions
The requirement that an individual must earn less than 10 per cent of their income from employment to be able to deduct a personal contribution to their super was removed.
Allowing ‘catch-up’ concessional contributions
From 1 July 2018, individuals whose superannuation balance at the end of the previous financial year is less than $500,000 will be able to carry forward unused concessional cap amounts from the previous five years. This applies to working out an individual’s concessional contributions cap from the 2019-20 financial year onwards.
More tax offsets for spouse contributions
This increases the amount of income an individual’s spouse can earn before the individual stops being eligible to a tax offset for contributions made on behalf of their spouse.
Changes to earnings tax exemptions
There are now tax exemptions for earnings from “innovative” retirement products such as deferred lifetime annuities and group self-annuitisation products.
The earnings tax exemption for transition to retirement income streams has been removed. This means that earnings from assets supporting non-retirement phase transition to retirement income streams will be taxed at 15% regardless of the date the transition to retirement income stream commenced.
Members will also no longer be able to treat super income stream payments as lump sums for taxation purposes.
Abolishing the anti-detriment rule
The anti-detriment provision which allows superannuation funds to claim a tax deduction for a portion of the death benefits paid to eligible dependants was removed from 1 July 2017.
Super Guarantee rate increase changes were previously legislated to increase according to the following timetable
The Super Guarantee contribution rate is set to reach 12% in 2025
Click to see the proposed changes which have not yet been legislated.
Click to see pension changes.