There are a number of changes to superannuation starting on 1 July 2017 that are summarised below however, the key question is to decide what has to be done before 1 July 2017.
The first item to consider is contributions. For some people, the period before 30 June 2017 will be their last chance to contribute to superannuation.
If your balance in your fund is over $1.6 million at 30 June 2017 then you will no longer be able to make non-concessional contributions from 1 July 2017. If you are in this category, then you must make a decision on contributions now.
You will still be able to make a concessional contribution past 1 July 2017 as long as you meet a work test.
The new contributions limits post 1 July 2017 are as follows:
- Non-concessional – $100,000 (if your member balance at 1 July is under $1.6m)
- Concessional – $25,000
Property valuation, pension mode, and taxation
The second item to consider before 30 June 2017 relates to members who have property in their fund, and who draw a pension. This is because the ATO is allowing a reset of the cost base of assets to the market value as at 30 June 2017 where those assets were supporting the payment of pensions. This is most relevant to those members who have a balance of $1.6m or more.
This leads to the second big change post 30 June 2017 in that $1.6m will be effectively the maximum amount that can support a pension account. Anything above this will roll back into accumulation mode and be taxed at 15%. A valuation of assets at 30 June 2017 is therefore crucial for these members who will now have part of their funds pushed back into accumulation mode.
Another key change that will start post 1 July 2017 is that a fund will become taxable when the pension being drawn is considered a transition-to-retirement pension. (TTR). These TTR pensions are drawn by people still working and aged between their preservation age and 65. The pensions drawn will still remain tax-free but the fund will start paying tax on its earnings.
What to address before 1 July 2017
Therefore there are two key takeaways for Superannuation members before 30 June:
- Decide on your contributions now – it may be your last time.
- Have your properties revalued if you are in pension mode.
If you’d like to know more about superannuation changes and financial planning for retirement, call Geoff Morris at Billings and Ellis today.