From 1 July 2017, the annual non-concessional contribution cap will be reduced from $180,000 to $100,000 per year. This will remain available to individuals aged between 65 and 74 years old if they meet the work test.
The non-concessional contributions cap is set at four times the concessional contributions cap ($25,000 for 2017–2018) and will increase in line with the indexation of the concessional contributions cap.
Additionally, from 1 July 2017 your non-concessional cap will be nil for a financial year if you have a total superannuation balance greater than or equal to the general transfer balance cap ($1.6 million in 2017–2018) at the end of 30 June of the previous financial year. In this case, if you make non-concessional contributions in that year, they will be excess non-concessional contributions.
CHANGES TO CONCESSIONAL (PRE-TAX) CONTRIBUTIONS
Concessional (pre-tax) contributions to your super include:
• employer contributions;
• any amount you salary sacrifice into super; and
• personal contributions you claim as a personal super contribution deduction.
From 1 July 2017, the 10% ‘maximum earnings’ condition for personal super contributions deductions no longer applies.
Concessional contributions cap
As concessional contributions are paid before tax is applied, it means that your super fund pays 15% tax on the contribution when it is paid to them.
From 1 July 2017, the concessional contributions cap is $25,000 for everyone. Previously, it was $35,000 for people 49 years and older at the end of the previous financial year and $30,000 for everyone else. The new cap will be indexed in line with average weekly ordinary time earnings (AWOTE), rounded down to the nearest $2,500.
Carry-forward of unused concessional contributions
From 1 July 2018, you will be able to 'carry-forward' any unused concessional contributions cap. You will be able to access your unused concessional contributions cap on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire. The first financial year in which you can access unused concessional contributions is 2019–2020.
You will only be able to carry-forward your unused concessional contributions cap if your total superannuation balance at the end of 30 June of the previous financial year is less than $500,000.
NEW TRANSFER BALANCE CAP FOR RETIREMENT PHASE ACCOUNTS
From 1 July 2017, there is a limit on how much of your super you can transfer from your accumulation super account/s to tax-free "retirement phase" account/s to receive your pension income.
This limit is known as the ‘transfer balance cap’. The cap relates to the amount you transfer into retirement phase accounts. There is no limit to the amount of money you can have in your accumulation super account(s).
The transfer balance cap will start at $1.6 million, and will be indexed in line with the consumer price index (CPI), rounded down to the nearest $100,000. The amount of indexation you are entitled to will be calculated proportionally based on your available cap space. Only the amount of remaining cap space is indexed.
You will have your own personal transfer balance cap to keep track of any indexation you are entitled to. If you use all of your cap or go over it, you will not be entitled to indexation. You will be able to make multiple transfers into the retirement phase as long as you have available cap space.
Any retirement phase income streams commenced before 1 July 2017 will be counted towards the transfer balance cap on 1 July 2017. New pension accounts (commenced from 1 July 2017) will be counted towards the transfer balance cap when they commence.
If your pension account grows over time (through investment earnings) to more than $1.6 million, you won’t exceed your cap. If your pension account goes down over time, you can’t 'top it up' if you have already used your cap.
If you exceed your transfer balance cap, you may have to remove the excess from one or more retirement phase income streams, and pay tax on the notional earnings related to that excess.