LIMITS ON HOW MUCH YOUR EMPLOYEE CAN CONTRIBUTE TO THEIR SUPER
Currently:
- annual cap on concessional (before-tax) super contributions (includes employer payments and salary sacrifice) is $30,000 or $35,000 if your employee is aged 49 or over on 30 June 2016; and
- annual cap on non-concessional (after-tax) super contributions to $180,000 for your employees (any employees between 65 and 74 years old, need to meet the work test to be eligible to make contributions) or $540,000 in a 3-year period if employees are under 65.
From 1 July 2017, the Government will lower:
- annual cap on concessional (before-tax) super contributions to $25,000 for everyone (includes employer payments and salary sacrifice); and
- annual cap on non-concessional (after-tax) super contributions* to $100,000 for your employees (any employees between 65 and 74 years old, need to meet the work test to be eligible to make contributions) or $300,000 in a 3-year period if employee is under 65.
* From 1 July 2017, your employees can only make non-concessional contributions if their account balance is below $1.6 million.
TAX DEDUCTIONS FOR PERSONAL PAYMENTS TO SUPER
Currently, individuals usually need to be self-employed to get a tax deduction for payments they make to super. But from 1 July 2017, employees under 75 may be able to claim a deduction for super payments up to $25,000. This $25,000 limit includes any employer and salary sacrifice super payments, and if your employee is between 65 and 69 they need to have worked at least 40 hours within 30 consecutive days during the year.
INTRODUCTION OF $1.6 MILLION SUPER BALANCE TRANSFER CAP
Currently, there’s no limit on how much super your employees can transfer to a retirement income stream account. From 1 July 2017, the maximum amount your employees can move from their super (accumulation) account to their retirement income stream account is $1.6 million.
TAX INCREASE ON SUPER CONTRIBUTIONS FOR HIGH INCOME EARNERS OVER $250,000
Currently, your employees earning $300,000 or more pay 30% tax on concessional contributions. From 1 July 2017, your employees earning more than $250,000 will incur an extra contributions tax on their concessional contributions and be taxed at 30%.
CONTINUED SUPPORT FOR LOW-INCOME EARNERS UNDER $37,000
If your employee earns less than $37,000 a year, they can still receive up to $500 a year from the Government to offset the contribution tax paid on their super. The money will go back into their super account.
NEW TAX ON TRANSITION TO RETIREMENT EARNINGS
Currently, investment earnings on all income stream accounts are tax-free. From 1 July 2017, earnings on income stream accounts set up under a transition to retirement strategy (TTR) will be taxed at 15%, in line with super (accumulation) accounts. Even with this change, a TTR strategy can still be a great way to get your employees’ super working harder as they approach retirement. Your employees must have reached their preservation age to start a TTR strategy.
NEW $1.6 MILLION SUPER BALANCE TRANSFER CAP INTO A RETIREMENT INCOME ACCOUNT
There’s currently no limit on how much super your employees can have in a retirement income stream account. But if your employee is close to retirement, a $1.6 million cap will apply to both new and existing income stream accounts. To avoid penalty, your employee will need to withdraw the excess from their super or transfer any amount over the cap, to a super (accumulation) account by 1 July 2017 (or by 31 December 2017 if the excess is under $100,000).
TRANSITIONAL CAPITAL GAINS TAX RELIEF FOR SUPER FUNDS
To support super funds to comply with changes to the super system that start on 1 July 2017, the government has introduced transitional capital gains tax (CGT) relief for affected funds. Transitional CGT relief is available to super funds for certain CGT assets that will lose the tax exemption by complying with the new transfer balance cap and the transition-to-retirement income stream (TRIS) reforms commencing.
CGT relief must be chosen by a trustee for a CGT asset. The asset must have been held by the fund throughout the period 9 November 2016 to midnight 30 June 2017. There are two new questions in the CGT schedule for transitional CGT relief. It applies to certain CGT assets held by a complying SMSF between the start of 9 November 2016, to ‘just before’ 1 July 2017. If CGT relief is chosen, the trustee must advise the ATO in the 2017 CGT schedule that they have chosen for the CGT relief to apply at question 8F and any capital gain deferred to a later year at question 8G. A fund must report the above on, or before, the day they are required to lodge their fund’s 2017 tax return. This decision is irrevocable.