THE FEDERAL BUDGET SUPER REFORMS – HOW WILL THEY IMPACT YOU?
From 1 July 2017, a range of super reforms are set to come into play. What are the changes and how will they impact you?
The Australian Government’s office of Treasury, state once implemented, these changes will help to improve the fairness, sustainability, flexibility and integrity of the superannuation system.
They also state that the legislated superannuation changes are only expected to affect 4% of all individuals with superannuation.
If you earn less than $40,000 or are self-employed you will benefit from more flexible super contribution rules. If you are a high income earner or have a large super balance there are new contribution limits and a balance cap that will change how much you can add to your super.
Explained in summary here are the main changes and who they will affect:
LOW INCOME EARNERS
Those earning up to $37,000 a year will receive a Low Income Superannuation Tax Offset (LISTO) contribution to their super fund. The LISTO contribution will be equal to 15% of their total pre-tax super contributions for an income year, capped at $500.
Individuals with a total superannuation balance of less than $500,000 just before the beginning of a financial year can carry-forward unused concessional cap space (for up to 5 years) to use if they have the capacity and choose to do so.
HIGH INCOME EARNERS
Anyone earning more than $250,000 a year will have their concessional superannuation contributions taxed at 30% (this was $300,000 previously)
RETIREES OR THOSE APPROACHING RETIREMENT
From 1 July 2017, the amount of money a person can transfer into their superannuation account during the retirement phase will be capped at $1.6million.
Individuals under the age of 65 - as well as those aged 65 to 74 - who meet the work test, will be able to claim a tax deduction for personal contributions to eligible superannuation funds up to the concessional contributions cap.
ANTI-DETRIMENT RULE NOW ABOLISHED
Under this new law, a super fund will not be able to pay a refund of a member’s lifetime superannuation contributions tax payments into a deceased estate. Likewise, the super fund will not be able to claim a tax deduction for this payment.
There is quite a lot of information and we have only provided a snippet here. Remember, it is imperative that you speak to your financial adviser before making any decisions regarding your super and your financial future.