Radical and substantial superannuation changes take effect from 1 July 2017: have you investigated how the super changes will affect your superannuation and retirement plans?
Effective from 1 July 2017, “a $1.6 million superannuation transfer balance cap on the total amount of superannuation that an individual can transfer into retirement phase accounts.” The cap will be applied to “both current retirees and to individuals yet to enter their retirement phase.” This cap will be indexed in $100,000 increments, in line with increases in the consumer price index (rate of inflation). The financial consequence for current retirees is, if they have more than $1.6 million of super in pension phase, they will need to withdraw the excess balance OR revert the excess amount to accumulation phase (which is then subject to 15% earning tax), before 1 July 2017. Subsequent earnings on this pension balance, from July 2017, will not be required to be withdrawn. Note that special rules apply to defined benefit pensions. This measure is RETROSPECTIVE, because it applies to Australian super balances that have been accumulated in the past, under existing laws. The lack of grandfathering indicates this policy applies retrospectively.
The announcement of the removal of the tax exemption for fund earnings derived from assets supporting a transition-to-retirement pensions (TRIP) shocked many sections of the financial services industry and certain caught out many older workers currently using TRIPs. Taking effect from 1 July 2017, the parliament has removed the tax-exempt status of super fund earnings supporting a transition-to-retirement pension (TRIP). This measure will raise $650 million over 4 years.
From 1 July 2017, the general concessional contributions cap will be lowered to $25,000 (2017/2018 year) from $30,000 (2016/2017 year), and the over-50s cap of $35,000 (2016/2017 year) will be dead from 1 July 2017. This measure, along with applying higher contributions tax to the contributions from high-income earners (see later in the list), will raise $2.43 billion over 4 years.
For more information, contact ICG Financial Planners in Melbourne today.