Super reform bills receive assent

Two of the three Bills that formed the superannuation reform package first announced by the government in the 2016 Federal Budget have received assent.

The Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 received assent on 29 November.

The Superannuation (Excess Transfer Balance Tax) Imposition Bill 2016 received assent on 29 November.

The remaining Bill within the package, the Superannuation (Objective) Bill 2016, was previously referred to the Senate Economics Legislation Committee, with the report due by 14 February 2017.

The Acts make a number of changes to the taxation and regulation of superannuation to make the system fairer and more sustainable, and to provide more flexibility and choice.

Schedule 1 of the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 (the Act) imposes a $1.6m cap (the transfer balance cap) on the amount of capital that can be transferred to the tax-free earnings retirement phase of superannuation. The Act also introduces additional income tax rules on recipients of certain defined benefit income streams in excess of $100,000 per annum to achieve a broadly commensurate taxation outcome. If an individual exceeds their transfer balance cap, the Commissioner will direct an individual’s superannuation income stream provider to commute (reduce) their retirement phase interests by the amount of the excess (including excess transfer balance earnings) to rectify the breach.

The individual will also be liable for excess transfer balance tax on their excess transfer balance earnings to neutralise the benefit received from having excess capital in the earnings tax exempt retirement phase. This tax is imposed by the Superannuation (Excess Transfer Balance Tax) Imposition Act 2016. Breaches in the 2017/18 financial year attract a single tax rate.

Other changes made by the Act include:

  • reducing the annual concessional contributions cap to $25,000 for those under 49, and reducing the threshold at which high-income earners pay Div 293 tax on concesisonally taxed superannuation contributions to $250,000
  • reducing the annual non-concessional cap to $100,000
  • enabling eligible low-income earners to receive the low income superannuation tax offset
  • removing the requirement that individuals must earn 10% of their income from employment-related activities to be able to claim tax deductions from personal contributions to superannuation
  • allowing individuals to make catch-up concessional contributions by utilising unused amounts of the concessional contributions cap from the five previous financial years, and
  • introduces provisions to encourage individuals to make superannuation contributions for their low-income spouses.

If you have any concerns around these new super reforms and how they may impact you please feel free to call;

Cayle Petritsch
SMSF Specialist Advisor
T: 02 9984 7774

Martin van der Saag
T: 02 9984 7774

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