With 30 June 2017 just around the corner, there are a few things you may need to consider with your SMSF and retirement plan due to the recent changes to the super fund regulations.
Contribution Caps
From 1 July 2017 the concessional contributions cap will be reduced to $25,000 for everyone. Previously, the cap was $30,000 for persons under 50 and $35,000 if you were over 50.
The non-concessional cap will also been lowered to $100,000 a year. Previously, this cap was $180,000 per annum.
Pension Balance Cap
One of the biggest changes to the super fund rules is that members with pension accounts need to make sure that their pension balances do not exceed the new cap of $1.6 million. This is a total cap on all your pension accounts between your super funds. Individuals exceeding this cap will need to take action before 1 July 2017 to avoid penalty taxes.
Capital Gains Tax (CGT) Relief
Due to the new $1.6 million cap on pensions, the Government has introduced temporary CGT relief for assets that need to be transferred from pension to accumulation phase. This rule allows the trustee of a complying super fund to elect whether they would like to reset the asset’s cost base to the market value as at 30 June 2017. The relief is only available to assets purchased by the super fund prior to the 9th of November 2016.
Transition-to-retirement Accounts
Unfortunately, the new legislation means that the earnings from all transition to retirement accounts are no longer tax-free but rather taxed at 15% as of 1 July 2017 onwards. This makes the option of transitioning into retirement far less appealing, with the only benefit being you are able to withdraw a maximum of 10% of your account balance as an annual pension if you are eligible. The aim of this new rule is to reduce tax avoidance and rather cater to individuals who have the intention of retiring in the near future.
Division 293 Income Threshold
Division 293 places a tax of 30% on an individual’s concessional super contributions if they exceed a certain income threshold. Previously, this threshold has been $300,000. The new rules have reduced it to $250,000, causing a higher number of individuals to fall into this category.
The new super rules can be quite complex, particularly the $1.6 million cap, so if you have any concerns or queries regarding this matter make sure you speak to your financial adviser, or alternatively we can recommend one to you.