You may have read last week that some of the superannuation rules which were proposed in the 2016 Federal Budget have now been passed by both Houses of Parliament and are waiting for Royal Assent.
We think that this is good news as we now have some certainty around superannuation - and we have seven months before most of the changes take effect. This means there is time to plan before the commencement of the new rules to ensure that you are set up to take advantage where possible. Conversely, it creates an opportunity to potentially limit the effects where the changes may have a less favourable outcome on your position.
Over the Christmas break we will be working through each Self-Managed Superannuation Fund we administer to determine whether you will be affected by the new rules. If we consider that you will be affected we will be in contact with you in the new year to discuss your options, which may require specific advice from either our office or your financial planner.
Under current legislation, any specific advice regarding superannuation must be provided to you by a licensed Advisor. This can either be a Financial Planner or an Accountant who is an Authorised Representative of an Australian Financial Services License (AFSL) holder.
Don’t have a financial planner? That’s ok! You may recall from a previous newsletter that, with the implementation of new licencing rules on 1 July 2016, we became Authorised Representatives of a limited financial planning licence held by Bentleys (QLD) Super Pty Ltd (AFSL 476816). This means we can provide advice to you in respect to superannuation, including your Self Managed Superannuation Fund, the effect of these changes, and the possible strategies you may wish to consider for your fund.
The advice we are licenced to provide includes what is referred to as General Advice and Personal Advice. Please click here to obtain a copy of our Financial Services Guide (FSG) which we are required to give you to help you understand these different types of advice, and the requirements that come with the advice we give.
We understand this is an important issue, and possibly somewhat confusing as there will be a lot of discussion and information available on the changes in the coming months. Please bear in the mind that each person’s situation is different and a strategy that may be beneficial to one person or fund will not necessarily work for another. So it is important that you seek advice specific to your own situation.
In the meantime, the following is a summary of some of the more significant changes that have been legislated:
- Concessional (tax deductible) contributions will be limited to $25,000 per year (down from $30,000 for under 50's and $35,000 for over 50's)
- A rolling 5 year catch up will be added for concessional contributions for those with a balance of less than $500,000
- Personal concessional contributions will be able to be made by anyone, not just the self-employed
- Non-concessional (after tax) contributions will be limited to $100,000 per year provided you have less than $1.6M in super (down from $180,000 per year regardless of balance)
- Tax on contributions will increase to 30% (rather than 15%) where your personal income is more than $250,000 per annum (down from $300,000)
- A limit of $1.6M is being introduced as the amount that can be used to commence a pension (which reduces the tax rate on earnings to 0%). Balances in super over this will have the earnings subject to 15% tax.
- Earnings on balances supporting a Transition to Retirement Income Stream (TRIS) will be taxed at 15% (up from 0%).
As always, if you have any questions or concerns regarding this, please don’t hesitate to contact our office.