Trust Deeds & Superannuation Changes – things you need to know
The last twelve months has seen the most significant superannuation changes in the last decade. The majority of these changes are coming into effect on 1 July 2017, and it is important that you are aware and understand these changes. The changes impact on those contributing to superannuation, in transition to retirement phase and may impact those in pension phase.
As controllers of your Superfunds you must ensure that they remain up-to-date with the latest legislative changes. This will ensure that your superfund remains compliant and that you can get the most out of your fund. Due to the significant changes, we are recommending that you update your Superfund Trust Deed.
Superfund Trust Deeds
Updating your Superfund Deed involves reviewing your existing trust deed to identify any areas that require updating, removing or adding, and providing you with an amended deed with the relevant changes that are made. If you have any questions in relation to updating your Trust Deed, please contact us.
SUPERFUND CHANGES
Details of the changes coming into effect for superannuation is listed below:
Concessional contributions cap reduced & allowing catch-up contributions: Reduction of concessional contributions cap to $25,000 per annum (this includes employers 9.5%) – from 1 July 2017.
Catch-up contributions: Those with a total superannuation balance of less than $500,000 will be able make ‘carry-forward’ concessional contributions – from 1 July 2018. Unused concessional contributions from the previous five years will be able to be used.
Non-concessional contributions caps reduced: The cap for non-concessional (after-tax) contributions is reduced from $180,000 to $100,00 per year – from 1 July 2017. Members under 65 are still eligible to make three years’ contributions in a single year, and those aged between 65 and 74 years of age are still required to meet the work test.
Transition to Retirement Pension income taxable: The tax-exempt status of earnings from assets that support a TRIS will be removed. Earnings from assets supporting a TRIS will be taxed at 15% regardless of the date the TRIS commenced – from 1 July 2017. Members will also no longer be able to treat super income stream payments as lump sums for taxation purposes.
Relaxing of deductibility of personal contributions: All taxpayers can now claim a tax deduction for personal contributions to superannuation (subject to the $25,000 cap) – from 1 July 2017. This change removes the previous condition that required less than 10% of your income to come from salary and wages to claim the deduction personally.
There are opportunities here for;
- businesses to have more flexibility with their superannuation payments
- employees whose employers would not offer salary sacrificing
- employees wanting to make a lump sum contribution
- those who receive both business and employment income
$1.6 million Pension Cap – transfer balance cap: A $1.6 million cap on the total amount that can be held as a tax-free pension for each person. The remainder amount can be held in accumulation phase and earnings are subject to 15% tax. – from 1 July 2017.
Low income superannuation tax offset expanded: Income earners with ‘adjusted’ taxable income up to $37,000, will receive a superannuation tax offset equal to 15% of their total concessional (pre-tax) contributions. The maximum offset is $500 – form 1 July 2017.
Spouse Tax Offset: The spouse’s income threshold is increasing from $13,800 to $40,000. The offset is an 18% tax offset for each dollar contributed. The maximum tax offset is $540 – form 1 July 2017.
Reduction of Division 293 income threshold for high income earners: The income threshold for Division 293 to apply has reduced from $300,000 to $250,000. Division 293 is an additional 15% charged on concessional (pre-tax) contributions above the threshold – from 1 July 2017.
If you would like to speak to one of our specialists about your current SMSF, please contact your local office Cranbourne, Prahran or Mornington.
Article by Cranbourne Director, Dave Sheahan CPA.