Superannuation Reform Exposure Draft: Concessional Contributions
The Government has recently released three exposure drafts on its proposed superannuation reforms. In this article we outline the proposed changes to concessional contributions, as outlined in the second exposure draft.
A $1.6m cap will be placed on the total amount of accumulated superannuation that an individual can transfer into the tax-free retirement phase, effective from 1 July 2017. Individuals who have pension balances in excess of $1.6m at 1 July 2017 will need to “roll back” the additional amount to accumulation phase (where it will be subject to 15% earning tax) by 1 July 2017.
The annual concessional contributions cap will be reduced to $25,000 for individuals of all ages. Contributions made to super funds will be subject to tax but however will be counted towards an individual’s overall concessional contributions cap.
Catch-up concessional contributions for unused cap amounts for previous years will be available to individuals with total super balances of less than $500,000. The unused amounts will be carried forward over a rolling five year period, starting from 1 July 2018.
The income threshold for Division 293 Contributions will be reduced from $300,000 to $250,000. Above this threshold, the additional 15% Division 293 tax will be imposed on concessional contributions.
Access to tax free earnings for pension assets supporting transition to retirement income streams (TRIS) will no longer be available from 1 July 2017, regardless of when the pension commenced. Earnings from such assets will now be taxed at 15%. In addition, individuals will no longer have the ability to elect to make certain TRIS payments as lump sums for tax purposes.
The Treasurer has stated that the Government is on track to introduce its superannuation reforms into Parliament before the end of 2016, with changes to have effect from 1 July 2017.
Should you have any questions in relation to the changes, or super reform in general, please contact us or speak to your ESV engagement partner on 02 9283 1666.