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Quick round up of the big 2017 super changes

There were important changes to super on July 1. Tamara Ting rounds them up so you’re aware and can take action.

Wealthy Australians will be most affected by the significant rule changes to superannuation (and tax) that are now in place, but not only them. There’s new rules for low-income earners, for spouses and others – so it’s good for all of us to be aware of what’s going on.

The self-employed could benefit from some tax-concession measures, as could those who’ve had a break from the workforce (often women acting as carers) through catch-up concessional super contributions. These changes may not impact you immediately, but they could very well impact your contributions or retirement plans when you need to access your super down the track.

Key changes to be aware of

  • Generally up to $1.6 million of super retirement savings can be moved into an account for you to draw a pension from. Previously there was no limit. This is likely to be a significant issue for high-net worth retirees. People already retired with income-stream balances more than $1.6 million may face penalties. Those impacted by the changes should seek professional advice before taking action.
  • While you can now only contribute $25,000 a year to your super as a concessional contribution, if you don’t, or contribute less than this, you can add an unused amount of the concessional contributions cap to next year’s limit.* So in the future if you only contribute $10,000 in one year, you could contribute $35,000 the next year. To be eligible for this rule, your total super balance must be less than $500,000 before the start of the financial year. Unused amounts can be carried forward for a maximum of five years.
  • From after-tax earnings, you could contribute $100,000 each year to super (down from $180,000). If you are aged under 65, you may be eligible to bring forward two years of contributions allowing up to $300,000 of after-tax contributions.**

While some of these changes reduce the tax concessions available in super, especially for higher income earners, super remains a tax effective way to save for retirement throughout your working life, especially if you plan ahead.

For more information about the changes and how they may affect you, read on for more details. And:

Nine big super reforms

  • Reduction in annual non-concessional contributions cap to $100,000 (or $300,000 if bringing two years of contributions forward, if eligible).
  • Reduction in the annual concessional contributions cap to $25,000. This applies regardless of age and includes compulsory super from your employer.
  • Catch-up concessional contributions available for those with total superannuation balance(s) less than $500,000.*
  • Anyone under the age of 75 may be eligible to claim a tax deduction for personal super contributions. If you are aged 65 or over, you would need to meet work test. This could be beneficial for anyone who isn’t offered a salary-sacrifice arrangement with their employer and want to make additional tax deductible super contributions.
  • An additional 15 per cent tax on certain concessionally taxed super contributions, if your adjusted income exceeds $250,000 (including employer compulsory contributions and any salary sacrifice). Super continues to be tax effective for many depending on your marginal tax rate.
  • Up to 15 per cent tax on income of transition-to-retirement (TTR) super pension. TTR pensions are no longer considered a retirement-phase income stream. Pension payments from these super pensions continue to be tax-free if you are over the age of 60.
  • Anti-detriment payments ceased for deaths from July 1, 2017. For deaths prior to this date an anti-detriment may still apply but the benefit must be paid before July 1, 2019.
  • Offset for contributions to your spouse’s super (if your spouse earns under $40,000).
  • Introduction of the low-income super tax offset (effectively a continuation of the low income super contribution). This contribution of $500 is paid into an individual’s super fund account. Those with an income of $37,000 or less may be eligible.

*These measures commenced July 1, 2017, except for the catch-up concessional contribution measure which will start July 1, 2018. Refer to The Australian Taxation Office website for more details.

** Your ability to make non-concessional contributions may be limited by your total superannuation balance(s) at the end of the previous financial year. For example, you cannot make any non-concessional contributions if your total superannuation balance(s) is $1.6 million or more at the end of the previous financial year.

Before taking action, re-directing your super or moving money into ANZ Smart Choice Super, you will need to consider whether there are any adverse consequences for you, including exit fees, other loss of benefits (e.g. insurance cover), investment options and performance, functionality, increase in investment risks and where your future employer contributions will be paid.

Taxation and superannuation law is complex and this information has been prepared as a guide only and does not represent advice. Please seek advice before taking action. The information provided is of a general nature and does not take into account your personal needs, financial circumstances or objectives.

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*All the strategies above may not be relevant to you and your financial situation, but it provides good insight into how being more aware of government legislation and strategic with your financial planning can help you save or make money.

This material is current as at May 2018, but may be subject to change. It has been prepared without taking into account your objectives, personal financial situation or needs. Elliot Watson is an Authorised Representative of Elliot Watson Financial Planning ABN 23 001 774 AFSL 238429. This information is of a general nature and has been prepared without taking account of your personal needs, financial circumstances or objectives. Before acting on this information you should consider whether the information is appropriate for you having regard to your personal needs, financial circumstances or objectives. Please see your adviser for advice taking into account your individual circumstances. This information is also our interpretation of the law and does not represent tax advice. Before making any financial decision, ANZ recommends you obtain professional financial and taxation advice specific to your circumstances.

 

OnePath Custodians Pty Limited (OnePath Custodians) ABN 12 008 508 496, AFSL 238346, RSE L0000673 is the trustee of the Retirement Portfolio Service (ABN 61 808 189 263, RSE R1000986) (Fund) and issuer of the interests in “ANZ Smart Choice Super”, a suite of products consisting of ANZ Smart Choice Super, ANZ Smart Choice Super for employers and their employees and ANZ Smart Choice Super for QBE Management Services Pty Ltd and their employees.

ANZ Smart Choice Super is issued by OnePath Custodians and distributed by Australia and New Zealand Banking Group Limited (ANZ) 11 005 357 522. ANZ is an authorised deposit taking institution (Bank) under the Banking Act 1959 (Cth). OnePath Custodians is the issuer of this product but is not a Bank. Except as described in the relevant Product Disclosure Statement, the obligations of OnePath Custodians are not deposits or liabilities of ANZ or its related group companies. None of them stands behind or guarantees the issuer or the capital or performance of any investment. Such investment is subject to investment risk, including possible repayment delays and loss of income and principal invested. Returns can go up and down. Past performance is not indicative of future performance.

This information is subject to change. You should read the relevant Financial Services Guide (FSG), PDS, product and other updates (for open and closed products) available at ANZ.com.au/super and consider whether the product is right for you before making a decision to acquire, or to continue to hold the product. Updated information will be available free of charge by calling Customer Services on 133 665.

Taxation law is complex and this information has been prepared as a guide only and does not represent tax advice. Please see your tax adviser for independent taxation advice.

The information on insurance cover is a summary only of the terms and conditions applying to the insurance cover. To the extent there is any inconsistency with the terms of the insurance cover provided by the insurer, the terms of the insurance policy will prevail.

The information provided is of a general nature and does not take into account your personal needs, financial circumstances or objectives. Before acting on this information, you should consider the appropriateness of the information, having regard to your needs, financial circumstances or objectives. The case studies used in this article are hypothetical and are not meant to illustrate the circumstances of any particular individual. Opinions expressed in this document are those of the authors only.

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