Unless you’ve been hiding in a dark corner, you probably know the government made some big changes to superannuation which will come into force from July 1, 2017.
On 23 November 2016 (and receiving royal asset on 29 November 2016), the Australian parliament made radical and substantial changes to superannuation law. The super changes are:
- Introduction of a $1.6 million transfer balance cap for retirement
- Removal of tax exemption for transition-to-retirement pensions (TTR pension)
- Cut in annual concessional (before-tax) contributions cap to $25,000
- Introduction of catch-up concessional contributions over 5-year period (from July 2018)
- Cut in annual non-concessional (after-tax) contributions cap to $100,000
- Continuation of the Low Income Super Contribution (super tax refund)
- Increase in income threshold for spouse superannuation tax offset to $37,000 (and $40,000)
- Tax hike for more Australians: 30% tax on concessional (before-tax) super contributions
- Expansion of tax-deductible super contributions to all Australians
- Removal of work test for over-65s, for making super contributions (SCRAPPED)
- Removal of option to treat a pension payment as a lump sum payment, for tax purposes
- Removal of anti-detriment provisions
- Extension of tax exemption for other types of retirement products
Important: An indirect change to the super rules, but highly significant change to the retirement plans of Australians with super savings, is the introduction of a harsher Age Pension assets test that came into effect on 1 January 2017. Rather than losing $1.50 for every $1,000 over the full Age Pension threshold as the current test applies, instead, from January 2017 a retiree will lose $3.00 for every $1,000 of assets over the full Age Pension threshold. Although announced in the 2015 federal budget (and subsequently made law with the support by the Coalition with the support of the Greens), this change to the Age Pension assets test took effect from 1 January 2017. The harsher Age Pension assets test will mean more than 300,000 Australians will lose part, or all, of their Age Pension entitlements.