Superannuation top five for 1 July 2017
10 April 2017
Last year’s Federal Budget posed some of the most significant changes to superannuation in the past ten years and means that individuals and advisers have a number of matters to action before the new rules commence on 1 July 2017.
According to BDO’s superannuation partner, Paul Rafton, the top five things that advisers and individuals need to consider now in order to meet the 30 June 2017 deadline are:
- Take advantage of the opportunity for higher concessional limits by implementing salary sacrifice strategies or contributing additional deductable super contributions. From 1 July the cap for concessional contributions is due to reduce to $25,000pa.
- From 1 July the $1.6m Transfer Balance Cap kicks in. This means there is a limit on the total amount of tax free super than an individual can retain in “Pension Phase”. The transfer balance cap will be applied to current retirees and to individuals yet to enter retirement from 1 July 2017. Individuals with balances over $1.6m in Pension Phase will need to reduce their Pension balance to $1.6m or less, by transferring the excess amount to Accumulation Phase or removing the excess amount from the superannuation system entirely.
The ATO will apply penalties to amounts over $1.6m in Pension Phase after 30 June 2017.
- Non-concessional contribution limits – The annual cap of $180,000 per person will reduce to $100,000 from 1 July 2017.
Accordingly, the bring-forward cap of $540,000 will reduce to $300,000 after 30 June 2017.
- Transition to Retirement Pensions will no longer be considered tax exempt from 1 July 2017, therefore individuals need to consider whether a TRIS is still appropriate for them.
- Estate Planning – While individuals are considering the impact of superannuation changes, now is a good time to check estate plans, making sure that Wills and Power of Attorney are up to date.
Fund trustees and their advisers need to consider if the 1 July 2017 rule changes cause any existing death benefit nominations or reversionary pensions to become invalid after 30 June 2017.