i) Change to personal super contributions deductions
In 2016-17, an individual (mainly those who are self-employed) can claim a deduction for personal super contributions where they meet certain conditions. One of these conditions is that less than 10% of their income is from salary and wages. This is known as the 10% maximum earnings condition.
From 1 July 2017, the 10% work test for claiming a deduction for personal super contributions will be removed. This means most people under 75 years old will be able to claim a tax deduction for personal super contributions (including those aged 65 to 74 who meet the work test).
ii) Changes to concessional contributions – constitutionally protected and unfunded defined benefit funds
From 1 July 2017, there are changes to the definition of concessional contributions for constitutionally protected funds (CPFs) and unfunded defined benefit funds. These contributions will count towards your concessional contributions cap.
The ATO has released information on the following topics, which can be accessed on the ATO website.
- What are CPFs and unfunded defined benefit funds?
- What are the changes?
- New rules for accumulation interests
- New rules for defined benefit interests
- Excess concessional contributions.
iii) Removal of election to treat super income streams as lump sums
From 1 July 2017, the Government will remove the ability to treat super income stream benefits as super lump sums for tax purposes.
This change means that, if you are receiving a super income stream, and normally would have made this election, you will no longer have access to the super lump sum low rate cap for payments from your income stream. Therefore, the amount of tax you have to pay on your super income stream may change.
iv) New transfer balance cap – child death benefit recipients
From 1 July 2017, the Government has introduced a new transfer balance cap for retirement phase accounts. Different rules apply for child recipients of death benefit income streams.
Child recipients of a death benefit income stream from a deceased parent may have a modified transfer balance cap, rather than the general transfer balance cap ($1.6 million in 2017-18).
The normal transfer balance rules apply, but the modified transfer balance cap depends on the deceased parent’s super interests.
v) New transfer balance cap – death benefit income streams
From 1 July 2017, there is a $1.6 million cap on the total amount that can be transferred and held in the tax-free retirement phase. Special rules apply to death benefit income streams.
If you start to receive a death benefit income stream, a credit will arise in your transfer balance account. The amount of the credit and when it counts towards your transfer balance cap will depend on whether the death benefit income stream is reversionary or non-reversionary:
- reversionary – the income stream reverts to you automatically upon the member’s death
- non-reversionary – the trustee has the power to choose between paying you a lump sum or an income stream (or a combination of these).
vi) Transfer balance account – credits and debits
From 1 July 2017, the Government introduced a new transfer balance cap for retirement phase accounts. Your transfer balance account tracks the amounts you transfer into or out of retirement phase and allows you to see whether you have exceeded your transfer balance cap.
|There have been a lot of changes to the superannuation rules recently. It is worth sitting down with your tax adviser or tax agent to discuss how these changes might affect you.