27 Jul Preparing for proposed super changes
The Coalition resuming power in the 2016 Federal election has created a number of challenges for SMSF trustees, who now have to deal with the super reforms unveiled in the 2016 Federal Budget.
While the changes do not come into effect until 1 July 2017, and some may be modified before this date, preparing for them is the challenge confronting trustees.
The first changes are those to the concessional and non-concessional contribution rules. For concessional contributions, the annual contribution limit for this year is $30,000 for those under the age 49, or $35,000 for those aged 49 or more. From 1 July 2017, the limit becomes $25,000 for everyone.
Therefore, those who can afford it should ensure that they utilise the concessional contribution entitlement this year, as the lower contribution limit will reduce a person’s ability to salary sacrifice or make personal tax-deductible contributions to super.
The Coalition also introduced a $500,000 lifetime cap on non-concessional contributions. This limit is set to replace the previous annual limit of $180,000, or $540,000 every three years, and will be indexed in increments of $50,000. If this after-tax contribution change is introduced as proposed, it will apply from 1 July 2007.
Therefore, if a person has contributed more than $500,000 to super between July 2007 and to May 3, they are not required to withdraw that amount. However, those who have contributed more than $500,000 after May 3 must remove any excess above this amount to avoid facing a tax penalty. An ATO release authority is needed to allow excess funds to be withdrawn from the fund.