Start your tax planning today
New changes to the superannuation rules
There are important changes to the superannuation rules in financial year 2017 / 2018. These changes may affect you.
Tax deductible personal contributions
From 1 July 2017, all individuals may be able to claim a tax deduction for the personal contributions made to a complying superannuation fund. Previously, this option was mainly available to the people operating own businesses. These personal contributions are treated as concessional contributions. The yearly concessional contributions cap is now $25,000. The concessional contributions cap includes your employer’s compulsory contributions, additional employer’s contributions, salary sacrificed contributions and tax deductible personal contributions.
To be eligible to claim a deduction for personal contributions, you would need to contact your superannuation fund, and follow the specific procedures to make the payments before the end of financial year. If you are over 65 years old, certain restrictions may be applicable to you. If you are interested to make tax deductible personal contributions, you are suggested to contact your superannuation fund at least two weeks prior to the financial year end.
This arrangement is particularly useful for an employee whose employer does not allow salary sacrifice or reduces employer superannuation contributions when arranging salary sacrifice.
Catch-up concessional contributions
From 1 July 2018, the ATO will allow catch-up concessional contributions for those individuals who have a total superannuation balance less than $500,000 at the end of a financial year and have not fully utilised the annual concessional contribution cap. The individual may utilise unused balances of concessional contribution caps from the previous five financial years commencing from 1 July 2018.
Annual non-concessional contributions cap
From 1 July 2017, the annual non-concessional contributions cap is $100,000. Individuals may use non-concessional contributions to boost their superannuation balances. You may also utilise the 3-year bring-forward rules to contribute up to $300,000 non-concessional contributions in one financial year. Non-concessional contributions are treated differently from concessional contributions. In brief, you cannot claim a tax deduction for your non-concessional contributions. If you are over 65 years old, certain restrictions may be applicable to you.
Transfer balance cap
Effective 1 July 2017, there is a limit on how much of your superannuation you may transfer to your superannuation pension account. Investment income earned inside the pension account is generally tax free. The current transfer balance cap is $1.6 million. In additions, if your total superannuation balance reaches $1.6 million at the end of the previous financial year, you may not be eligible to make non-concessional contributions.
Spouse contributions
From 1 July 2017, an individual may claim a 18% tax offset of up to $540 if the individual makes contributions to spouse’s superannuation fund, whose total of assessable income, reportable fringe benefits amount and reportable employer super contribution is less than $37,000. The tax offset is progressively reduced to zero until the spouse reaches the upper threshold of $40,000. Previously, the upper threshold was $13,800.
Government co-contribution
An individual may be eligible to a 50% co-contribution of up to $500 made by the federal government if the individual makes a non-concessional contribution and whose total of assessable income, reportable fringe benefits amount and reportable employer super contribution is less than $36,813. The co-contribution is progressively reduced to zero until the individual reaches the upper threshold of $51,813. To be eligible for the co-contribution, you must earn 10% or more of employment or business income.
Removal of transition-to-retirement pension tax exemption
From 1 July 2017, the tax exemption on transition-to-retirement pension is no longer available. This change is referring to the tax treatment at the superannuation fund level. An individual started a transition-to-retirement pension before July 2017 may need to review the arrangement.
If you have any questions in relation to the new superannuation rules, please contact us.
Vincent Wan
CPA, Registered Tax Agent
Feb 2018