ARE YOU ABREAST OF THE NEW SUPER REFORM CHANGES?
Super Reform Changes came into effect on 1 July 2017. Here’s what you need to consider in relation to your retirement goals.
Super contribution cap reduced by up to $10,000
Changes to superannuation from 1 July 2017 have reduced the concessional contribution cap to $25,000 for everyone. If you made concessional contributions (such as salary sacrifice) of more than $25,000 to super last financial year, you may need to reduce your contributions to avoid breaching the concessional contribution cap this year. Contact Evolution Advisers to determine if your retirement goals will still be on track in light of these changes.
High income earners to pay 15% more tax on super contributions
If you earn over $250,000 a year, your concessional super contributions could be subject to an additional 15% tax. Your earnings could include realised capital gains, payments received on termination of employment and superannuation lump sums taken under age 60. Whilst super is still a tax effective way to save for retirement, it’s a good idea to speak to Evolution Advisers to ensure you will still be on track to meet your goals.
Are you thinking of contributing more than $100,000 to super?
The after-tax contribution cap is now $100,000 a year; or $300,000 over a 3 year period for anyone under age 65 and has a total superannuation balance less than $1.4 million at the beginning of the financial year. If you’ve made a contribution over $180,000 in the previous two financial years, you may be eligible for ‘transitional’ rules. If you’re planning on making a large contribution to super, consider speaking to Evolution Advisers to give you the best chance of meeting your retirement goals.
Earnings in Transition to Retirement (TTR) pensions now taxed at 15%
Changes to superannuation from 1 July 2017 mean TTR pensions are now subject to 15% tax on earnings derived from assets supporting the TTR pension. This, combined with the reduced concessional contribution cap of $25,000, means that TTR strategies may not be as beneficial as they once were. If you currently have a TTR pension or are considering a TTR, its worth asking Evolution Advisers whether the strategy is suitable for you, or if any changes to your existing strategy are required.
Have the latest super changes affected your beneficiaries?
Significant changes to death benefits from superannuation pensions and the rules around how they can be transferred to beneficiaries came into effect on 1 July 2017. For example, super death benefit pensions now count towards the beneficiary’s Transfer Balance cap of $1.6m and can no longer be converted back to the beneficiary’s super account. Any amount of death benefit pension that exceeds the recipient’s transfer balance cap must be cashed out of the superannuation environment. Like many of the recent super reforms, these changes are complicated and could potentially undermine the effectiveness of your estate plan so it’s important to contact Evolution Advisers to discuss your situation and ensure your beneficiaries have the financial security you intended.
Things you might have missed.
Spousal contribution threshold increased
- Review if your spouse’s salary is below the new threshold of $37,000.
- Review if your spouse’s and your own SMSF balance may need to be rebalanced.
- Determine if you have any available after tax income to contribute to your spouse’s superannuation and be eligible for an offset.
Catch up concessional contributions (First available from 1 July 2019)
- Review your work patterns to determine your future likely income streams
- Review if your total superannuation balance is under $500,000 to determine your eligibility to make catch up contribution payments in the future.
Anti-detriment reduction repealed from 1 July 2017
- Determine if your SMSF was intending to or currently funding a future anti-detriment payment.
- If an SMSF member dies before 1 July 2017, anti-detriment payments will still be possible up until 30 June 2019
The changes mentioned above are all diverse and need specific discussion in relation to your circumstances. Talk to the SUPER men and women at Evolution Advisers today for advice on your situation.