Andrew from Vista Financial Posted January 20, 2017 Share Posted January 20, 2017 Reduction in Concessional Contribution (SalarySacrifice/Pre-Tax Contributions) Cap Status: Passed Effective: 1 July 2017 The concessional contribution (CC) cap will reduce to $25,000 pa for all individuals regardless of age. The cap will be indexed in line with AWOTE in $2,500 increments. Individuals with sufficient surplus cash-flow could use the opportunity to maximise CCs for amounts made before 1July 2017 up to $35,000 for those who were 49 or over on 30 June 2016 and up to $30,000 for those under age 49. SMSF trustees should be mindful from1 July 2017 of unallocated reserves if any which may, when allocated, get counted towards the CC cap. Changes to Non Concessional Contribution (Post-tax Contributions) Cap Status: Passed Effective: 1 July 2017 The non-concessional contribution (NCC) cap will reduce from $180,000 to $100,000 pa. Individuals cannot make NCCs if they have a total super balance of $1.6 million or more at 30 June of the previous financial year. Eligible individuals will be able to access a three year bring forward of up to $300,000. Transitional measures will apply to the bring-forward rule. Personal Deductible Contribution Changes Status: Passed Effective: 1 July 2017 All individuals under the age of 75 will be eligible to make personal contributions for which they can claim a tax deduction up to the CC cap. Currently, individuals need to meet the 10% test (maximum earnings as an employee condition) to be eligible. This will enable people in a range of situations to make personal deduction contributions and potentially target the CC cap where that is currently not possible. Key examples include people who: are employed and receive SG contributions that are within the CC cap, but their employer doesn’t offer salary sacrifice arrangements switch from being a self-employed contractor to an employee during the course of a year and fail the 10% test due to employment income, and are residents for tax purposes who are working overseas for a foreign employer and their employer can’t or won’t contribute to an Australian super fund. Catch-up Concessional Contributions Status: Passed Effective: 1 July 2018 Individuals with super balances less than $500,000 will be able to access a higher annual cap and contribute their remaining unused CC cap on a rolling basis for a period of five years. Only unused amounts accrued from 1 July 2018 can be carried forward. This will enable individuals who take time out of work or work part-time to make catch-up contributions when they accumulate lumpy income or decide to go full-time. An opportunity exists for those who intend to sell a CGT asset in the future where they can accumulate the amount of unused CCs.They can then make a lump sum unused CC to offset the CGT liability on the sale of an asset by making a personal deductible contribution. Changes to TTR Income Streams Status: Passed Effective: 1 July 2017 Earnings and gains from investments held in a Transition to Retirement (TTR) pension will no longer be exempt and will be taxed at 15%. This change will apply to existing and new TTR income streams irrespective of the commencement date. Individuals will also no longer be allowed to treat certain superannuation income stream payments as lump sums for tax purposes. This change will have a significant impact on individuals running a TTR aged less than 60. This is because they will also pay tax on income payments, thereby negating the tax benefit for certain income earners. However, the strategy may still be beneficial when used for its intended purpose (ie for individuals wishing to reduce employment hours while maintaining their cash-flow at current levels). CGT relief is available for super funds for capital gains realised on the transfer of assets from pension phase before 1 July 2017. Introducing transfer balance cap Status: Passed Effective: 1 July 2017 The total amount of super monies that can be transferred to pension phase will be capped at $1.6 million. The cap will be indexed in $100,000 increments in line with CPI. An apportionment approach will be used to determine how much cap space is available. Individuals in excess of the transfer balance cap on 1 July will need to either: transfer the excess amount to the accumulation phase, or withdraw the excess amount from their super fund. CGT relief will be provided to all complying super funds to adhere with the transfer balance cap rules. The CGT relief will enable funds to reset the cost base of assets reallocated from pension to accumulation phase before 1 July 2017 to comply with the transfer balance cap rules. Regards Andy Please note that the above information is general information only and should not be taken as financial advice. Quote Link to comment Share on other sites More sharing options...
purpleal Posted January 23, 2017 Share Posted January 23, 2017 Reduction in Concessional Contribution (SalarySacrifice/Pre-Tax Contributions) Cap Status: Passed Effective: 1 July 2017 The concessional contribution (CC) cap will reduce to $25,000 pa for all individuals regardless of age. The cap will be indexed in line with AWOTE in $2,500 increments. Individuals with sufficient surplus cash-flow could use the opportunity to maximise CCs for amounts made before 1July 2017 up to $35,000 for those who were 49 or over on 30 June 2016 and up to $30,000 for those under age 49. SMSF trustees should be mindful from1 July 2017 of unallocated reserves if any which may, when allocated, get counted towards the CC cap. Changes to Non Concessional Contribution (Post-tax Contributions) Cap Status: Passed Effective: 1 July 2017 The non-concessional contribution (NCC) cap will reduce from $180,000 to $100,000 pa. Individuals cannot make NCCs if they have a total super balance of $1.6 million or more at 30 June of the previous financial year. Eligible individuals will be able to access a three year bring forward of up to $300,000. Transitional measures will apply to the bring-forward rule. Personal Deductible Contribution Changes Status: Passed Effective: 1 July 2017 All individuals under the age of 75 will be eligible to make personal contributions for which they can claim a tax deduction up to the CC cap. Currently, individuals need to meet the 10% test (maximum earnings as an employee condition) to be eligible. This will enable people in a range of situations to make personal deduction contributions and potentially target the CC cap where that is currently not possible. Key examples include people who: are employed and receive SG contributions that are within the CC cap, but their employer doesn’t offer salary sacrifice arrangements switch from being a self-employed contractor to an employee during the course of a year and fail the 10% test due to employment income, and are residents for tax purposes who are working overseas for a foreign employer and their employer can’t or won’t contribute to an Australian super fund. Catch-up Concessional Contributions Status: Passed Effective: 1 July 2018 Individuals with super balances less than $500,000 will be able to access a higher annual cap and contribute their remaining unused CC cap on a rolling basis for a period of five years. Only unused amounts accrued from 1 July 2018 can be carried forward. This will enable individuals who take time out of work or work part-time to make catch-up contributions when they accumulate lumpy income or decide to go full-time. An opportunity exists for those who intend to sell a CGT asset in the future where they can accumulate the amount of unused CCs.They can then make a lump sum unused CC to offset the CGT liability on the sale of an asset by making a personal deductible contribution. Changes to TTR Income Streams Status: Passed Effective: 1 July 2017 Earnings and gains from investments held in a Transition to Retirement (TTR) pension will no longer be exempt and will be taxed at 15%. This change will apply to existing and new TTR income streams irrespective of the commencement date. Individuals will also no longer be allowed to treat certain superannuation income stream payments as lump sums for tax purposes. This change will have a significant impact on individuals running a TTR aged less than 60. This is because they will also pay tax on income payments, thereby negating the tax benefit for certain income earners. However, the strategy may still be beneficial when used for its intended purpose (ie for individuals wishing to reduce employment hours while maintaining their cash-flow at current levels). CGT relief is available for super funds for capital gains realised on the transfer of assets from pension phase before 1 July 2017. Introducing transfer balance cap Status: Passed Effective: 1 July 2017 The total amount of super monies that can be transferred to pension phase will be capped at $1.6 million. The cap will be indexed in $100,000 increments in line with CPI. An apportionment approach will be used to determine how much cap space is available. Individuals in excess of the transfer balance cap on 1 July will need to either: transfer the excess amount to the accumulation phase, or withdraw the excess amount from their super fund. CGT relief will be provided to all complying super funds to adhere with the transfer balance cap rules. The CGT relief will enable funds to reset the cost base of assets reallocated from pension to accumulation phase before 1 July 2017 to comply with the transfer balance cap rules. Regards Andy Please note that the above information is general information only and should not be taken as financial advice. So, in simple terms - what will happen if you exceed the $25,000 per year Concessional Contribution (SalarySacrifice/Pre-Tax Contributions) Cap ? My spouse will exceed this - the normal employer contribution and then also salary sacrifices $550 a month into super. Will their be a higher rate of tax on anything above the $25K? Would this be done at their marginal rate of income tax? thanks! Quote Link to comment Share on other sites More sharing options...
northshorepom Posted January 23, 2017 Share Posted January 23, 2017 Yes and yes, same as contributions over the cap now. No point salary sacrificing The cap reductions are stupid. Anyone would think the federal government wanted to stoke up property investment and therefore market rather than their stated aim of the reverse..... Quote Link to comment Share on other sites More sharing options...
purpleal Posted January 24, 2017 Share Posted January 24, 2017 If you are earning above $250k, super contributions are going to be taxed at 30% - is this still not better than the income being taxed at the soon to be marginal rate of 45%? Quote Link to comment Share on other sites More sharing options...
northshorepom Posted January 24, 2017 Share Posted January 24, 2017 No, I think you cop for the lot https://www.ato.gov.au/Rates/Key-superannuation-rates-and-thresholds/?anchor=Concessionalcontributionscap#Concessionalcontributionscap Quote Link to comment Share on other sites More sharing options...
purpleal Posted January 24, 2017 Share Posted January 24, 2017 No, I think you cop for the lot https://www.ato.gov.au/Rates/Key-superannuation-rates-and-thresholds/?anchor=Concessionalcontributionscap#Concessionalcontributionscap Oh well - looks like our mortgage will be getting paid off earlier! I still can't see why the government wants to penalise those wanting to save extra for the future - I would have thought they would be encouraging us to save even more to prevent us from becoming a strain centrelink/pension wise later on when we are in retirement. Quote Link to comment Share on other sites More sharing options...
Ken Posted January 24, 2017 Share Posted January 24, 2017 Oh well - looks like our mortgage will be getting paid off earlier! I still can't see why the government wants to penalise those wanting to save extra for the future - I would have thought they would be encouraging us to save even more to prevent us from becoming a strain centrelink/pension wise later on when we are in retirement. Middle income earners will always be the oppressed minority. There are too few of them and they're too expensive to bribe. But in the future when you are a strain on Centrelink/pension you can look forward to having the prospect an extra $10 a week dangled in front of you if you vote their way (and promptly having it taken away once they're in office). Quote Link to comment Share on other sites More sharing options...
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