Every few years Accountants and Financial Advisers are faced with the daunting challenge of Super Changes. In the efforts to make super simple and fair, policies are constantly changed with the current political views. This makes our job ever more difficult. As an advocate of Superannuation it concerns me greatly as every change makes it harder to sell. 2017 is going to see the biggest changes yet. Removal of incentives to contribute to super, removal of tax concessions for taking pensions, and a cap on how much you can have in super are all negatives of the changes. Here’s a quick run through of what might effect you (all from 1 July 2017);
- A reduction in the concessional contributions (employer contributions) cap to $25,000 pa for everyone. Currently it is $30,000 for under 49 years old, and $35,000 for those aged over 49.
- A reduction in the non concessional cap (after tax) to $100,000 pa from $180,000 pa.
- If you have a balance above $1.6 million in super you will no longer be able to make after tax contributions at all.
- Anyone who earns above $250,000 will pay 30% tax on their super contributions, as opposed to 15%.
- Changes to Transition to retirement pensions will mean earnings on these pension accounts will now be taxed. Previously these funds were not taxed which created a great tax effective strategy for many semi retired people.
The two shining lights in these changes are the following;
- From 1 July 2017 if you could claim a deduction for any personal contributions made to super. Previously this was only available to self employed people.
- A tax offset applied to making spouse contributions of up to $540 will now apply to spouses who earn less than $40,000. Previously this limit was $10,800 pa. This allows many more people to be eligible for the offset.
Everybody’s situation is different and you must discuss if any of these affect you with a professional. The above commentary is based on my opinion and should not be relied on to make financial decisions. Speak to your financial adviser to discuss how these changes will effect you.