The budget has been handed down and as suspected, Treasure Scott Morrison has handed down the biggest shake up in over a decade targetting high income earners. There are major changes for Superannuation Funds, particularly, those who utilise the contribution caps – both concessional and non concessional.
The changes are hot off the press however here are some changes from 1 July 2017:
- Concessional contributions cap to be lowered to $25,000 – Currently, these are $30k per year under the age of 50 and $35k for those aged 50 or more. Its definitely worth considering a reserve or double contribution strategy.
- Catch-up concessional contributions allowed – Access to unused annual concessional cap amounts will be allowed to be carried forward for persons with super balances below $500k – This is a move that will particularly benefit women who take time out from their careers to have children.
- $500k Lifetime Non-Concessional Contributions Cap – This is a huge change for high income earners and contributions before 3 May will not count towards the cap. Amounts contributed beyond the lifetime cap will need to be removed or be subject to penalty tax.
- Division 293 tax threshold lowered – Currently, a 30% total tax (15% standard rate + 15% “surcharge”) is applied to concessional contributions for those persons on “incomes” of $300k or more. This threshold is to be lowered to $250,000, so the “surcharge” cuts in sooner.
- In other good news for retirement savers, the Government is extending the ability for all individuals aged under 75 to make tax concessional contributions to their superannuation. People aged 65-74 will also now be able to make contributions to, and receive contributions from, their spouse.
- Transition to retirement pensions – The Govt plans to remove the tax exemption on earnings of assets supporting transition to retirement pensions (for persons over preservation age and not retired).
Its definitely a challenging time with these changes been announced on the same day as the RBA reduce the official cash rate to 1.75%. Many will have pre-empted the budget announcement with contributions been made to their Superannuation Funds. Its a perfect storm, seek advice from a SMSF Specialist on the best superannuation strategy for you.
Please note this article is for information purposes only and does not constitute financial product or legal advice. The content has been prepared without taking account of the objectives, financial situation or needs of a particular individual and does not constitute financial product advice
Ivan Filipovic is authorised through Dover Financial Advisers Pty Ltd – Australian Financial Services Licensee -License No. 30748 – Dover Authorised Representative Number 1244358
Redwood Wealth Pty Ltd – Dover Corporate Authorised Representative Number 1244359