Understand the key changes
The Federal Government has now passed its super reform legislation, which means there’ll be some changes to super– and most will take effect from 1 July 2017. Below is an overview of the key changes.
Current arrangement: Capped at $180,000 pa.
From 1 July 2017: Capped at $100,000 pa.
What it means for you: You might want to have a think about making the most of the current cap as it stands before it’s lowered.
Current arrangement: Capped at $540,000 over 3 years.
From 1 July 2017: Capped at $300,000 over 3 years. You can find more info at treasury.gov.au.
What it means for you: If you’re thinking about putting a lump sum into your super, it could be beneficial to consider taking advantage of the current higher cap.
Current arrangement: No current cap.
From 1 July 2017: You’re eligible to make non-concessional contributions until your account balance reaches $1.6 million.
What it means for you: If you already have $1.6 million or more in super at 30 June 2017, any further contributions you make will be classed as excess contributions, and additional tax may apply.
Current arrangement: $35,000 annual cap for people aged 49 and over $30,000 annual cap for people aged under 49.
From 1 July 2017: $25,000 annual cap regardless of age.
What it means for you: If you make before-tax super contributions of $25,000 or more a year, any contributions above the cap will be taxed at a higher rate.
Current arrangement: No ability to ‘catch up’ concessional contributions – meet the annual cap or lose it.
From 1 July 2018: From 1 July 2018 there’ll be the ability to ‘catch up’ concessional contributions over a 5-year period if your balance is less than $500,000.
What it means for you: This will give you the opportunity to carry forward any unused part of your yearly concessional contributions cap (up to $25,000) for up to 5 years so you can ‘catch up’ your super.
Current arrangement: 30% tax rate on concessional contributions applies once income exceeds $300,000.
From 1 July 2017: 30% tax rate on concessional contributions applies once income exceeds $250,000.
What it means for you: If you earn over $250,000 a year, consider talking to a financial adviser about how this could affect you.
Current arrangement: Tax deductions for personal super contributions for those earning less than 10% of their income from employment.
From 1 July 2017: Tax deductible personal (non-concessional) contributions for most members up to the new cap of $25,000.
What it means for you: If you haven’t reached your concessional cap for the year, you can claim a tax deduction for personal (non-concessional) contributions up to the new $25,000 cap.
Current arrangement: No limit on how much can be moved into or sit in an Income account.
From 1 July 2017: A maximum of $1.6 million can be moved into or sit in an Income account.
What it means for you: If you’re nearing retirement or already retired, you should take a look at what your current accumulated super balance is. From 1 July 2017, any money you currently have in an Income account above $1.6 million will need to go into an Accumulation account (where you’ll pay tax on your investment earnings) or be moved outside of super. If you’re not yet retired $1.6 million will be the limit on what you can move into an Income account.
Current arrangement: Investment earnings tax free in TTR accounts.
From 1 July 2017: Investment earnings to be taxed at up to 15% in TTR accounts.
What it means for you: If you have a QSuper TTR Income account, your investment earnings will no longer be tax free.
Current arrangement: Maximum spouse tax offset of $540 for spouse contributions if your spouse earns $10,800 - $13,800.
From 1 July 2017: Maximum spouse tax offset of $540 for spouse contributions if your spouse earns $37,000 - $40,000.
What it means for you: The increased spouse income threshold means more families will be eligible for this spouse tax offset – so if your spouse is earning less than $40,000 a year, this could be a great way to keep their super balance growing.
Current arrangement: May be payable when a member dies.
From 1 July 2017: No longer payable unless member dies before 1 July 2017 (but can be paid up until 1 July 2019) for members whose date of death is on or before 30 June 2017.
What it means for you: If a death anti-detriment payment was previously part of your estate planning you should talk to a financial adviser.
We understand that some of the information outlined above can be quite technical and may be a little hard to understand, so you might want to have a read of the Federal Government’s website for more information.
If you’d like to get some advice about how these changes could affect you and your future, it’s best to have a chat with a qualified financial adviser. QInvest’s advisers are experts in QSuper products, so they’ll be able to give you personalised advice to suit your needs. Book an appointment with QInvest today on 1800 643 893