The Australian Government has now passed its super reform legislation, which means there’ll be some changes to super – and most took effect from 1 July 2017. Below is an overview of the key changes.

Need advice?

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, such as QInvest. QInvest’s advisers are experts in QSuper products, so they’ll be able to give you personalised advice to suit your needs.

To chat or book an appointment with QInvest call 1800 643 893

Non-concessional (after-tax) contributions

Non-concessional (after-tax) super contributions cap

After tax changes

Current arrangement: Annual non-concessional contributions capped at $180,000.
From 1 July 2017: Annual non-concessional contributions capped at $100,000. Individuals with a total superannuation balance of more than $1.6 million at the start of the financial year are not eligible for the non-concessional cap (in other words, their non-concessional cap is nil).

What it means for you
If you were planning to increase your contributions to more than $100,000 in coming years, you may want to seek financial advice.

If you do make large non-concessional contributions, you will also need to be aware of changes to the bring-forward amount as well. If your total superannuation balance is more than $1.6 million at the start of the financial year, your non-concessional cap is nil and any further non-concessional contributions will be considered excess contributions.

Find out more | Read case studies


‘Bringing forward’ non-concessional (after-tax) super contributions

After-tax bring forward cap

Current arrangement: If you’re under 65 at any time during the financial year, you can contribute up to three times your non-concessional cap, which is currently a total of $540,000: $180,000 x 3 = $540,000.
From 1 July 2017: If you’re under 65 at any time during the financial year, you may still be eligible to bring forward, but this will depend on your total superannuation balance at the start of the financial year. You can find out more by clicking on the link below. If you are eligible to bring forward three times your non-concessional cap, this will be at the new total of $300,000: $100,000 x 3 = $300,000.

What it means for you
If you currently are planning or considering making large contributions, you may want to seek financial advice about your options.

Members with a total superannuation balance of $1.6 million or more at the start of the financial year will have no further eligibility for the non-concessional cap in that year. Please note: transitional arrangements apply where the bring-forward rule was triggered between 1 July 2015 and 30 June 2017. This means that the maximum amount of bring-forward available will reflect the reduced annual contribution caps. The ATO has further information available on the transitional arrangements.

Find out more | Read case studies


Changes to non-concessional (after-tax) contributions if you have $1.6 million (or more) in super

After tax contribution cap

Current arrangement: Currently, there is no limit on the amount of money members can have in their superannuation funds whilst they continue to make non-concessional contributions.
From 1 July 2017: Individuals with a total superannuation balance of more than $1.6 million at the start of the financial year are not eligible for the non-concessional cap.

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 non-concessional contributions, and additional tax may apply.

 

Concessional (before-tax) contributions

Concessional (before-tax) super contributions cap

Before tax contribution cap

Current arrangement: There is a $35,000 annual cap for people turning 50 or over in the 2016/2017 financial year, and a $30,000 annual cap for people under this age.

From 1 July 2017: The concessional contributions cap will be reduced to $25,000 regardless of age.

What it means for you
If you make before-tax super contributions, any contributions above the $25,000 cap may be taxed at a higher rate.  

Find out more | Read case studies


New ‘catch up’ measure for concessional contributions

Current arrangement: There is no ability to ‘catch up’ concessional contributions – you either use the annual cap, as above, or lose it.
From 1 July 2018: From 1 July 2018 there will be the ability to ‘catch up’ concessional contributions over a rolling 5-year period for eligible members with a balance less than $500,000 at the end of the previous financial year.

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 a rolling period of up to 5 years. You can start to  ‘catch up’ your super from 1 July 2019. Amounts that have not been used after 5 years will expire. 

Find out more | Read case studies


Contributions tax for high income earners

High income tax rate increasing

Current arrangement: Once your "adjusted income"1 exceeds $300,000, a tax of 30 per cent will apply to concessional contributions above this threshold.
From 1 July 2017: Once your "adjusted income"1 exceeds $250,000, a tax rate 30 per cent will apply to concessional contributions above this threshold.

What it means for you
If your "adjusted income"1 is over $250,000 a financial year, consider talking to a financial adviser about how this could affect you.

Find out more | Read case studies

 

Changes affecting Income account

Introduction of $1.6 million transfer balance cap

After tax contribion cap

Current arrangement: Currently, there is no limit on the amount of money that can sit within the tax-free environment for investment earnings of an income account. 

From 1 July 2017: A maximum of $1.6 million can be moved into an Income account. An important point to understand is that this cap isn’t per account; it applies to all money you have in these types of income accounts (including lifetime pensions).

What it means for you
After 1 July 2017, if you transfer more than $1.6 million into an Income account (excluding Transition to Retirement Income accounts), you will be required to remove the excess from the account plus the notional earnings relating to that excess. You will also be liable to pay tax on the notional earnings. 

If you are an existing Income account member the balance of your Income accounts at 30 June 2017 will count towards the transfer balance cap. This means you may be penalised if you already have more than $1.6 million across your Income accounts and you do not reduce the balance by 30 June 2017.

If you have more than $1.6 million in your Income accounts as at 30 June 2017, but less than $1.7 million, you will have until 31 December 2017 to reduce your balance by the excess that you existed at 30 June 2017. If your balance is currently more than $1.7 million it should be reduced by 30 June 2017, or you will incur tax penalties.

QSuper members who transfer an amount back to an Accumulation account from an Income account (for example to comply with the Government’s $1.6m transfer balance cap) will only bear tax on income and gains accruing on that amount from that date forward. That is, no tax will be borne by the member in respect of unrealised capital gains that have accrued to the member while in the Income account. The member will not need to make any election for CGT relief in this regard. QSuper will take any necessary action to apply the transitional CGT relief provided as part of the superannuation reform package.  

Find out more | Read case studies

 

Changes affecting Transition to Retirement (TTR) Income account

TTR accounts (including QSuper’s TTR Income account) will no longer be exempt from tax.

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 TTR Income account, your investment earnings will no longer be tax free.

 

Other super measures

Spouse tax offset

Current arrangement: The income threshold for the maximum tax offset of $540 is $10,800. The offset is gradually reduced for income above $10,800 and completely phased out at an income above $13,800.
From 1 July 2017: The income threshold for the maximum tax offset of $540 will increase to $37,000. The offset will be gradually reduced for income above $37,000 and completely phase out at an income above $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.

Find out more | Read case studies


Tax deductions for personal super contributions

Current arrangement: Tax deductions for personal super contributions available only for those earning less than 10% of their income from employment sources.
From 1 July 2017: The 10% rule is being abolished.

What it means for you
If you haven’t reached your concessional cap for the year, you can potentially claim a tax deduction for personal (non-concessional) contributions up to the new $25,000 cap. Please note that the work test applies for members aged 65 to 74. 

Find out more | Read case studies


Death anti-detriment payment (refund on contributions tax paid)

Current arrangement: May be payable when a member dies.
From 1 July 2017: Anti-detriment is no longer payable unless the member died on or before 30 June 2017, and the payment is made by 30 June 2019.

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.

 

The information outlined above is quite technical. In addition to the articles and case studies we have provided, the Australian government has provided some useful summary information here.

 

1. For the purposes of the contributions tax for high income earners, adjusted income includes taxable income (assessable income less deductions), net investment losses, net investment property losses, total reportable fringe benefit amounts, amounts on which family trust distribution tax has been paid and concessional contributions within the concessional contribution cap.