Change can be scary, especially if you are not prepared for it. The Australian Government announced that there would be changes to the Superannuation system that will go into effect starting 1 July 2017. That date is fast approaching, which is why you need to learn more about these changes now and how they could affect you and your investments.
Do You Earn Less Than $40,000?
If you or your spouse earns $40,000 a year or less, you will see a change in how your taxes are applied. Previously, a low income superannuation contribution policy was in place. This was repealed and will be replaced with a low income Super tax offset contribution. Those who are eligible will receive a contribution that is equal to 15% of their total pre-tax concessional contributions with a cap of $500.
There will also be changes to the spouse tax offset. Currently, the income threshold is $37,000 with reduced benefits that phase out at $40,000. The change will raise the threshold to $40,000.
2017 Super Contribution Changes
Your Super contributions may also change this year. Currently, a deduction can be claimed for individuals who meet certain conditions and earn less than 10% of income from wages and salary. This condition is being removed to add more flexibility to the system.
The non-concessional contribution cap will also change as of July 2017. It will go from $180,000 annually to $100,000.
A new requirement will be added for co-contributions. You must have a total Super balance that is under the transfer balance cap, which his currently $1.6 million, by the end of 30 June of the last financial year. You also must not have contributed more than the non-concessional contribution cap.
Are You Close to Retirement?
Some of the new Superfund changes will impact Australians that are close to retirement. The previous 10% max earnings condition for all personal Super contribution deductions will be removed.
The tax-exempt status is being removed for earnings that support a Transition-to-Retirement Stream or TRIS. All earnings accumulated from assets that support a TRIS will be subject to a 15% tax rate.
Individuals will also no longer be able to treat their Super income stream payments as a lump sum when calculating taxes.
Protect Your Investments in 2017 and Beyond
The best way to address these government Super changes is to go in armed with knowledge. Contact BIS Cosgrove to learn more about these and other changes that are coming in July and how to prepare for them. Our experts can provide advice and insight to help you reduce the financial impact of the SMSF update.