On 1st July 2017, the super reforms announced in the 2016 federal budget will come into effect.
Here are most important announcements from the 2016 Federal Budget in regards to your SMSF/Super and planning for 01 July 2017.
1. Transition to Retirement Income Streams (TTR)
- Do you have a TTR or are you considering starting one?
- From 1 July 2017, TTRs will lose their tax exemption on earnings, hence you may want to reconsider this option, unless you need the extra cashflow.
2. $1.6 million Transfer Balance Cap
- For those fortunate enough, this is the market value of your total retirement phase accounts which includes all income streams held in your name in ALL super funds excluding TTR.
- If so, you must commute the excess over $1.6 million back to accumulation phase, or withdraw the excess from super, so your total transfer balance account is no greater than $1.6m at 1 July 2017.
- The fund is eligible to apply for transitional CGT relief.
3. Transitional CGT Relief Rules
- Is your fund eligible to apply for CGT relief?
- Resetting the cost base of as CGT asset to its market value is to deem a sale, followed by an immediate re-purchase of the asset.
- The fund does not have to apply the CGT relief on any assets if it doesn’t want to. CGT relief is applied differently whether the segregated or unsegregated method is applied to the assets of the SMSF…Note – The choice to apply CGT relief if made on an asset to asset basis and is irrevocable.
4. Concessional Contributions
- From 1 July 2017, the concessional contributions cap will be reduced to $25,000 for all members. This is a reduction from the 2016-2017 year, the annual over-50s concessional contributions cap of $35,000, and is applicable to a person aged 49 years or over on 30 June 2016. For the 2016/2017 year, the current annual concessional cap for under-50s is $30,000, and is applicable to a person aged 48 years or under on 30 June 2016.
- The work test still applies for members aged 65 or over.
- Ensure you maximise this year’s higher contribution caps by 30 June 2017
5. Non-concessional Contributions
- From 1 July 2017, the annual non-concessional contributions cap will be reduced to $100,000. Note – The work test still applies for members aged 65 or over.
- If you are under 65 years, you will be able to make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year by the ‘bring forward arrangement’.
- If you have superannuation balance of $1.6 million or more on 30 June 2017 you are unable to make any more non-concessional contributions…period!
If you know that you will be affected by these changes and are feeling overwhelmed as an SMSF trustee or a member of a retail/Industry fund, I encourage you to call & let’s have a chat.
If you would like to know more about how we may be able to help you plan for your future, call us on 1300 99 77 34 or email your inquiry to firstname.lastname@example.org for a complementary initial consultation.
Disclaimer: This article contains general information; before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs. Click for more detail regarding this disclaimer.