Last month the government had its first sitting of Parliament since the election and though they released some draft legislation for comment, we expect more changes in the forthcoming months of this superannuation reform journey.
- The annual limit of Non-Concessional Contributions (‘NCCs’) will be reduced to $100,000 from the current cap of $180,000 from 1 July 2017.
- No NCCs will be permitted once the super balance exceeds $1.6million.
- The $500,000 lifetime cap on NCCs will be removed.
- The 3 year ‘bring forward’ NCC provision is still available however the maximum bring forward from 1 July 2017 will be $300,000 (currently $540,000).
- The current maximum bring forward remains at $540,000 up until 30 June 2017 (for individuals less than age 65).
- Special transitional rules apply where this bring forward period overlaps 1 July 2017.
- Work test for individuals aged 65 to 74 will continue to apply (this test was to be abolished from 1 July 2017).
- The Concessional Contributions Cap will be reduced to $25,000 from 1 July 2017 (currently for individuals 48 or under it is $30,000 and for those 49 and over it is $35,000).
- The catch up Concessional Contributions for individuals with superannuation balances of less than $500,000 to ‘carry forward’ unused concessional cap space for up to five years are now to commence from 1 July 2018 (previously this was to commence on 1 July 2017).
- The $1.6million pension account threshold and asset segregation – for those members with more than $1.6million in pension assets, segregation will not be permitted.
- This will include Reversionary Pension accounts being counted towards the beneficiaries’$1.6million transfer cap balance.
- This $1.6million cap will not apply to Transition to Retirement (‘TTR’) pensions.
- Restrictions on accessing TTR pensions from1 July 2017.
- The earnings on assets supporting a TTR will no longer be tax-free and will be taxed at 15%, regardless of the TTR start date.
- Payments from a TTR can no longer be classified as lump sum payments.
- Reduction of the Division 293 Tax Threshold for high income earners.
- The threshold will be lowered to $250,000 (from the current $300,000) at which high income earners pay additional contributions tax on their concessional contributions.
As for the remaining proposals, no further comments have been made on those to-date.
In summary, the above reforms are still only proposals and are subject to legislative approval. However, the government remains on track to have these measures introduced to parliament before the end of the year.
If you have any queries on any of the above or any other superannuation matters, please do not hesitate to contact our office.