Super is still working for you

The Federal Government announced significant changes to the proposed super reforms, which will come into effect on 1 July, 2017.

Significant changes

The Federal Government announced significant changes to their proposed super reforms, which will come into effect on 1 July 2017.

The most significant news is that the originally proposed $500,000 life-time non-concessional contribution cap won’t proceed.

Instead, from 1 July 2017, it is proposed that:

  • There will be an annual non-concessional contribution cap of $100,000 (reduced from the current annual cap of $180,000) and if you are under the age of 65, you will still be able to use the 3-year bring forward provision. This means that you will be able to put in a maximum of $300,000 once in every three years.
  • No further non-concessional contributions will be allowed once your super balance reaches $1.6 million.

Catch-up provisions

The concessional contribution catch-up provisions will be delayed and will now not commence until 1 July 2018. These were designed to enable those with flexible work patterns and lower super balances, such as women taking time out of the workforce to bring up children, to make catch up contributions.

For older workers, the Government has decided to keep the work test for those aged 65 to 74 (previously it was proposed to remove the work test for those aged 65 to 74 from 1 July 2017). This means that if you are aged between 65 to 74 you must prove you have worked 40 hours within a 30 day period in that financial year in order to make a contribution to super.

Please remember that these proposed changes are not yet law but are expected to be introduced into Parliament by the end of the year.

Opportunity

The head of BT Super’s Customer Engagement & Retention, Christine Artin, says these times of change are a great opportunity to take a look at your super and make sure it’s working its hardest for you.

“Our Australian super system has lots of great benefits and is protecting the future of millions of Australians. It can be difficult when there’s uncertainty about proposed changes, but if you’re like most Australians and fall within the lower caps, you really have nothing to stop you from being squarely focused on preparing for your future. Stay focused on your goals!”

It’s always a good time to look at your super and make sure you are on track for a comfortable retirement. For many people the changes will have no effect, but for all it may be a good time to consider seeking advice.

Q & A’s

The below information is prepared based on the proposed super changes announced by the Government on 15 September 2016 and contains general information only.

With the new contribution caps, how does it impact how much you can contribute?

The existing contribution rules or caps for the current financial year ending 30 June 2017 (2016/17) have not changed.

This means that generally, if you are eligible to contribute to super, you will have the ability to make up to $180,000 in non-concessional contributions this financial year. If you were under age 65 on 1 July 2016 and looking to “bring forward” future year/s’ contributions, you may still contribute up to $540,000 this financial year, but should be mindful of how this will limit what can be contributed for the next two financial years.

The government has announced that from 1 July 2017, the non-concessional contributions cap will be reduced to $100,000 per year. Generally speaking, if you are eligible to contribute to super, you may be able to make non-concessional contributions up to $100,000 per year to your super fund. If you are under age 65, the “bring forward” rule still applies to allow an additional two years’ worth of contributions (up to $300,000).

What if my super balance is already more than $1.6m?

The Government has announced that you will no longer be able to make non-concessional contributions once your super balance reaches $1.6 million from 1 July 2017.

This means, if eligible, a person will still be able to make non-concessional contributions under the current rules in the current financial year ending 30 June 2017. The current limits of $180,000 (or $540,000 for those under 65 seeking to ‘bring forward’ future year/s’ contributions) still apply.

However, from 1 July 2017, if your super balance has reached $1.6 million then you will no longer be able to make non-concessional contributions.

Can you still use the “bring forward” rule to make non-concessional contributions of up to $540,000 before 1 July 2017?

The “bring forward” rules will continue to apply under the proposed changes. Those utilising them this financial year will have the ability to contribute up to $540,000 this financial year. Be mindful though, if you don’t utilise the entire $540,000 before the end of this financial year, your remaining bring forward cap may be reassessed at 1 July 2017 in line with the new caps

Will there be any consideration for people who exceed their concessional cap in the first year after the changes?

We expect legislation reducing the concessional contributions cap to $25,000 will be in place before 1 July 2017, so you should be mindful of the cap before making any contributions.

Currently, however, if you exceed your concessional contributions cap, you can generally apply for a refund once the ATO has notified you that you have breached your cap. We do not expect this process to change. For more information, visit the ATO website at www.ato.gov.au.

To learn more about Self-Managed Super Funds, contact us to speak to a BT Adviser
What is Superannuation? Superannuation is an investment designed specifically to help you save for retirement. Here are some super basics to get you started.
Keeping tabs on your super – even in retirement, helps you manage your retirement savings to help ensure you are on track to achieve your goals.
We explain the rules about how much you can contribute into super each year – and when you can start to draw on your super, in line with your age and life stages.

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©233714 (Westpac). BT Advice is a Division of Westpac Banking Corporation ABN 33 007 457 141. Information as at 19 September 2016.