For those planning their retirement, the superannuation changes passed as legislation in November 2016 will possibly have more of an effect on your retirement than for anyone else. The quick implementation of the changes, and the lack of grandfathering of current rules, means that you will most likely have to review your retirement plans well before the changes occur on 1 July.
Here we look at some of the changes and what they may mean for those who are approaching imminent retirement.
End of tax exemption for transition to retirement (TTR)
For those with a TTR strategies, the removal of the tax exemption on these pensions means that 15 per cent tax will be payable on the earnings, similar to the way in which super in the accumulation phase is taxed.
$1.6 million transfer balance cap
If you’re planning to transfer your superannuation balance to a retirement income account (account-based pension), which is tax free, then you will be subject to a cap of $1.6 million (across all account-based pensions). If you have a super balance in excess of $1.6 million, then you can hold it in your accumulation account, where it will be subject to 15 per cent earning tax or you can invest it by other means. Earnings on the $1.6 million balance after 1 July 2017 will not be required to be withdrawn.
Increase to the income threshold for spouse contributions tax offset
If you currently make, or are planning to make a super contribution on behalf of your low-income earning spouse, the threshold under which this is allowable will increase from $13,800 to $40,000. The tax offset is currently worth up to $540.
Reduction of non-concessional contributions cap
If you are under the age of 65, then the reduction of the non-concessional contribution cap may have an effect on any lump sum that you are looking to contribute to super. You will only be able to make non-concessional contributions of $100,000 per annum – the cap until 30 June 2017 is $180,000. The bring forward rule, where you can make three years’ worth of contributions in one financial year, will also have an adjusted cap of $300,000.
Catch-up concessional contributions
If you’re planning to retire after 1 July 2018, you may be able to take advantage of catch-up concessional contributions to boost your super balance. Any unused portion of the concessional cap can be carried forward on a rolling basis for a period of five years. However, this is only available to those who have super balances totaling less than $500,000.
To learn more about the changes to super, and how you can plan for what’s ahead, read the latest YourLifeChoices eGuide How will July super changes affect you? sponsored by AustralianSuper.
This article has been sponsored by AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898. The views expressed are those of YourLifeChoices and not AustralianSuper. For more information about AustralianSuper, please visit australiansuper.com
