Your super changes survival guide
Navigate the financial year super changes
A raft of super changes were ushered in with the new financial year. Not all of the reforms will impact you and your super balance, but it’s important to understand those that will. Use our super survival guide to ensure your current strategy is still on track.
Stay alert: Super contribution limits have been cut
If you are making non-concessional (after-tax) contributions to your super or are considering ways to maximise your retirement savings, then changes to the super contribution limits may apply to you.
As of 1 July 2017, the annual limit on before-tax contributions reduced to $25,000. Previously, it was $30,000 for people under 50 and $35,000 for those 50 years and older. For after-tax contributions, the annual limit reduced to $100,000 on 1 July - it was previously $180,000.
Changing paths: Tax deductions for voluntary contributions
Voluntary contributions are the amounts you contribute to super from your after-tax income - that is, from your take-home pay. Before 1 July 2017, if you were an employee, in nearly all circumstances, if you made a personal super contribution you could not claim a tax deduction. However, you could receive a similar tax benefit by making salary sacrifice contributions.
With the new changes, eligible Australians under the age of 75 can claim tax deductions for personal super contributions, subject to the annual concessional contributions cap.
If you work for an employer who doesn’t allow you to make salary sacrifice contributions or if you’re self-employed, you can take advantage of the new concessional contributions rules by making voluntary super contributions, for which you can claim a tax deduction.
Keep an eye out: $1.6 million super cap
As of 1 July 2017, the Federal Government introduced a $1.6 million limit on the amount of super savings that can be transferred to a pension account. Designed to limit the total amount of super savings that can be moved from the accumulation phase into ‘a tax-free retirement account’, this cap applies to both current retirees and to individuals yet to enter their retirement phase.
Members with account balances greater than $1.6 million must maintain up to that amount in the pension phase and retain any additional balance in the accumulation phase.
Supporting partners: Low income spouse tax offset
Many Australians take time out of the workforce for family duties, study or periods of unemployment. These broken work patterns can significantly impact super balances.
As of 1 July 2017, if your spouse earns less than $37,000 per annum and you make a contribution to their super, you can claim a tax offset equal to 18% of the contributions, up to $540. You could also be entitled to a partial super tax offset if they earn up to $40,000. While other restrictions do apply, this change allows couples to receive greater benefits from contributing to each other’s super.
Goodbye tax exempt status: for TTR pension earnings
For Transition to Retirement (TTR) members, the government has removed the tax exempt status of earnings that support the transition to retirement income stream (TRIS), making the tax rate the same as a super accumulation account. For example, if you had a TTR pension of $200,000 and the investment earnings were $10,000 for the year, there was previously no tax on those earnings. Now the earnings will be taxed at up to 15%, or up to $1,500 in this example, depending on the type of underlying investments.
Whether you are contributing to super, about to retire or already retired, now might be a good time to discuss your plans. At VISSF, we offer an extensive range of advice services for members. Visit our advice page to see your options.
Get a head start on healthy finances
Join us at our complimentary How to Retire Ready seminar on Wednesday, 18 October 2017. RSVP here.