The Government has recently introduced significant changes affecting superannuation contributions, most of which apply from 1 July 2017. The purpose of this post is to inform you of the key changes, as they may impact on your future contribution plans in particular.
From 1 July 2017, the following key changes to the contribution rules will apply:
- Non-concessional (or personal non-deductible) contributions
- Reduced non-concessional contribution limits – The annual contribution limit has been reduced from $180,000 to $100,000 per person. Furthermore, the $540,000 ‘bring forward amount has been reduced to $300,000 (i.e., 3 x the $100,000 annual non-concessional contributions limit).
- New $1.6 million superannuation balance restriction for non-concessional contributions – An individual who has total superannuation entitlements of at least $1.6 million at the start of an income year will not be able to make non-concessional contributions in that year without breaching their limit.
- A reduced concessional (or deductible) contributions limit – The annual limit in respect of concessional (or deductible) contributions (e.g., employer contributions and personal deductible contributions) has been reduced from $30,000 or $35,000 (depending on the individual’s age) to $25,000 for all individuals (irrespective of their age).
- Claiming deductions for personal (after-tax) contributions – From 1 July 2017, an individual will generally be able to deduct personal (after-tax) contributions irrespective of their work status (i.e., whether or not they are an employee) and irrespective of the level of any salary income derived during the relevant income year.
- Additional 15% tax liability on contributions for people earning more than $250,000 – From 1 July 2017, individuals earning more than $250,000 will generally be liable to pay an extra 15% tax on deductible contributions (including employer contributions) received by their superannuation fund.
- Extending the tax offset for spouse superannuation contributions – From 1 July 2017, the existing tax offset of $540 (maximum) for spouse contributions will generally be available to a taxpayer who makes superannuation contributions for the benefit of a spouse whose income is less than $40,000 (the existing spouse income threshold is only $13,800).