IMPORTANT SUPERANNUATION CHANGES FROM 1/7/17

Legislation has now changed and below is an explanation of the major changes and how they will affect you, commencing 1/7/17

Where clients hold superannuation balances of $1.6 million (each) or more as at 30/6/17, you will not be able to make any non-concessional contributions in the tax year 2017/2018. Therefore, this financial year may be the last year to be able to maximise nonconcessional contributions, but this will depend on future value of your superannuation. Total super balances will include market value of all accumulation superannuation (including self-managed super funds), market value of allocated pensions/account based income streams, including transition to retirement pensions and value of superannuation pensions.

A limit of $1.6 million transfer balance cap will now apply to retirement phase income streams over your lifetime. This balance includes account based pensions (i.e. allocated pensions), paid from self-managed super funds and superannuation pensions such as from defined benefit funds.

PLEASE NOTE THAT THIS RULE APPLIES TO EVERYONE IRRESPECTIVE OF WHEN THE RETIREMENT INCOME STREAM COMMENCED.

The aim is to reduce the amount everyone can have in retirement phase income streams which attracts the favourable tax benefit.

In the case of defined benefit pensions, a value is assigned for valuation purposes, generally this value is 16 times annual income, but can vary depending on the superannuation pension provider. (you will need to check this with your provider to ascertain the value),

If you have more than $1.6 million in retirement phase income streams, you will need to either withdraw the balance over this figure or rollover back the amount to an accumulation account where underlying earnings are taxed at 15% before 30/6/17.

Please note in the case of superannuation pensions/defined benefit pensions, withdrawing or roll back won’t be an option, but if your pension is above $100,000 per annum, you will see a reduced tax rebate apply which means more tax to pay on this pension in future years.

For those clients who have self-managed super funds, now is the time to speak to your Accountant to determine if you need to act BEFORE 30/6/17. If this is the case, then there may be capital gains implications which your Accountant will be able to explain.

Non-concessional superannuation contribution limits (where no tax deduction is claimed) will reduce to $100,000 per year (currently until 30/6/17 will be $180,000). Therefore, an opportunity exists to maximise your non-concessional contributions this year.

Concessional superannuation contribution limits will reduce to $25,000 from 1/7/17 for everyone. (currently until 30/6/17 the limit is up to $35,000 depending on age). This includes employer contributions, salary sacrifice and for self-employed. Please make sure to amend any salary sacrifice arrangements with your employer and self-employed clients need to make sure they do not exceed the limits from 1/7/17. Therefore, an opportunity exists to maximise your concessional contributions this year.

Bring forward rule for non-concessional superannuation limits for individuals under age 65, will also reduce to $300,000 (currently until 30/6/17 will be $540,000). Therefore, an opportunity to use the larger bring forward limit in this year. If this has been commenced in years 2015/2016 or 2016/2017 and has not been fully utilised by 30/6/17, the outstanding amount will be reassessed in line with the new caps applying from 1/7/17.

Death benefits paid from 1/7/17. Valid beneficiaries of income stream investments will only have the option to continue to take payments as income streams or lump sums and will not be able to rollover these amounts back to accumulation phase in superannuation.

In the case of Transition to Retirement income streams, the earnings supporting these income streams will no longer receive a tax exemption and will be taxed in the same way as accumulation superannuation i.e. 15% tax to apply to underlying earnings. Those clients over age 60 will continue to receive income tax free up to the maximum income allowed being 10% of value each year.

Consequently, this strategy provides reduced benefits for all concerned, particularly when used in conjunction with salary sacrifice, where contribution limits are being reduced as noted on Page 1 for concessional contributions.


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We believe that the advice and information herein (which is confidential and for your private use only) is accurate and reliable. The information and opinions contained in this report have been obtained from sources Hendersons Pty Ltdbelieved to be reliable, but no representation or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. Information and opinions contained in the report are published for the assistance of recipients, but are not relied upon as authoritative and may be subject to change without notice. Except to the extent that liability cannot be excluded, Hendersons Pty Ltd does not accept any liability for any direct or consequential loss arising from any use of material contained in this report. Any recommendation is made on the basis of our research of the investments and may not suit all clients. Assessment of suitability to an individual’s portfolio can only be made after an examination of the client’s financial circumstances and needs. Unless specifically disclosed above, the representative(s) who prepared this document, the principals of Hendersons FP Pty Ltd and Hendersons Pty Ltd do not have an interest in mentioned securities which may reasonably be expected to be capable of having an influence in the making of any recommendation. However, the principals of Hendersons FP Pty Ltd and Hendersons Pty Ltd and/or entities and persons connected with them may have an interest in the securities the subject of the recommendations set out in this report. Hendersons Pty Ltd and/or its agents will receive brokerage on any transaction involving the relevant securities. Hendersons FP Pty Ltd is a licensed Securities Dealer and the holder of Dealers Licence No. 338020. Hendersons Pty Ltd is a Corporate Authorised Representative (CAR No.339937) of Hendersons FP Pty Ltd. All Hendersons Pty Ltd advisers hold a Proper Authority with Hendersons FP Pty Ltd.