The Senate has passed the key Bill that will give effect to the debated super reforms which will have a key impact on SMSF’s.
What does this mean for your SMSF?
The proposed changes from the 2016 Federal Budget have been watered down, however, Treasurer Mr Scott Morrison has stated the changes are the most significant changes to superannuation in more than a decade. The Treasurer initially planned to introduce a $500,000 lifetime cap on after tax contributions but faced a backlash from his own party and voters alike. Changes were made in a compromise.
The Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 contains the measures originally announced in the 2016/17 Federal Budget with subsequent amendments. The Bill was passed as introduced to Parliament without any changes. The majority of measures commence from 1 July 2017. As we all know the non-concession contribution lifetime cap has been watered down a little.
The key measuresto impact SMSFs include:
- Reducing the concessional contributions cap to $25,000 for all taxpayers
- Allowing a deduction for personal contributions without testing the proportion of employment income received (the 10% test)
- Reducing the non-concessional contribution cap to $100,000 per annum or $300,000 under the bring forward rule. Non concessional contributions are limited to a superannuation balance of less than $1.6 million
- From 1 July 2017, member pension balances exceeding $1.6million will need to be split between pension balances operating in a tax-free environment and accumulation balances attracting 15 per cent tax. This may require a partial commutation to accumulation phase or withdrawal of pension balances currently in excess of $1.6 million.
- A catch up or carry forward contributions for balances less than $500,000 for unused concessional caps for a period of five years from 1 July 2018
- Increasing the annual income threshold from $10,800 to $37,000 for eligibility for the spouse contribution tax offset.
- Abolishing the anti-detriment payment.
SMSF members may consider their contribution strategy pre 30 June 2017, including the current contribution caps before the new contribution cap kicks in. It’s important to seek qualified advice at all times to ensure your SMSF is ready for the new reforms.
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