New Regime – Fair and Sustainable Super
The legislation to implement the new Fair and Sustainable Super – Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 has now been enacted. The Fair and Sustainable Super changes are the most significant changes in Superannuation since the Costello changes of 2007.
The New Contribution Caps
From 1 July 2017 the new contributions caps will be $25,000 per financial year for concessional contributions and $100,000 per financial year for non-concessional contributions. Concessional contributions are contributions which can be claimed as a tax deduction while non-concessional contributions are contributions which cannot be claimed as a tax deduction.
Total Superannuation Balance – its impact on contributions
If a member’s total superannuation balance immediately before the start of a financial year (or in the case of 2017/18 financial year, immediately at the start of that year) is equal to or greater than $1.6m, then no ordinary non-concessional contributions can be made.
Catch up contributions
From the 2019/20 financial year, members will be able to make “catch up” concessional contributions. Where a member is unable to fully exhaust their concessional contribution cap in respect of a financial year, the unused portion (aka shortfall) of the concessional contribution cap can be carried forward to a later financial year and utilised in that later financial year.
Bring-forward of non-concessional contributions – first year is 2017/18 or later
In this situation, all years of the bring-forward period occur after 1 July 2017.
Bring-forward of non-concessional contributions – first year is 2015/16
In this situation two years of the bring-forward period occur before 1 July 2017 and only one year of the bring-forward period occurs after 1 July 2017.
Bring forward of non-concessional contributions – first year is 2016/17
In this situation only one year of the bring-forward period occurs before 1 July 2017 with two years of the bring-forward period occurring after 1 July 2017.
Personal injury contributions
These contributions are not subject to any contribution cap. Consequently, they can be made whether or not the relevant member has exhausted their non-concessional contributions cap, the bring-forward cap or the CGT non-concessional contributions cap.
Interaction between CGT and ordinary non-concessional contributions and the $1.6m capOrdinary and CGT non-concessional contributions have their own separate contribution caps: an annual $100,000 cap and a $1,415,000 lifetime cap (2016/17 dollar value of the cap).
Contribution planning for 2016/17
If you have not triggered the bring-forward in respect of 2016/17 and you are under age 65 at any time during the 2016/17 financial year, this is the last financial year in which you can make $540,000 of ordinary non-concessional contributions.
Contribution planning for 2017/18 and following years
In respect of the 2017/18 and following financial years, contribution planning will be dominated by:
The Fair and Sustainable Superannuation amendments will soon be upon us… but what to do next?
SUPERCentral has produced a tool to help you prepare your SMSF clients for the new superannuation world post 1 July 2017.
Michael Hallinan
Special Counsel Superannuation
Townsends Law
t: (02) 8296-6205
e: michael@townsendslaw.com.au