The laws relating to superannuation are changing and will potentially have a significant impact on your Self-Managed Super Fund (SMSF) from July 1, 2017
To ensure your fund is well positioned to take advantage of or to mitigate any negative impact to the legislative changes, relevant documentation may need to be in place prior to 30th June 2017. Failure to act prior before this date could mean it is too late.
The main changes are:
- $1.6 million is the maximum individual member balance, known as the transfer balance cap, which can be in pension phase with investment earnings being taxed at 0%. Any excess investment earnings received on a members balance above $1.6 million can remain in the fund, but the income will be taxed at 15%
- For members who are
currently in pension phase or receiving a transition to retirement pension and have unrealised capital gains on assets within the fund there will be the ability to reset the cost bases of these assets before 30th June 2017 (as long as the asset was owned by the superfund as at 9th November 2016.) This could be an appropriate strategy where you have a significant member account balance.
- Transition to retirement pensions that continue post 1st July 2017 will no longer receive any tax exemption on the fund’s investment income
- Annual concessional cap is reduced for all members to $25,000 (previously $30,000 for under 50’s and $35,000 for over 50’s)
- Annual non concessional cap reduces to $100,000 (previously $180,000) and cuts out entirely when you have reached your maximum transfer balance cap within the fund of $1.6M
- High income earners threshold reduced to $250,000 per annum (previously $300,000). If you earn in excess of this threshold you will pay an additional 15% tax on your concessional contributions, known as Division293 taxation
- Removal of the 10% work test – you will be able to claim a personal tax deduction for a super contribution irrelevant of where you derive your taxable income
We are currently reviewing all of our clients’ superfunds and will be in contact with you if we identify that a member is currently withdrawing a pension from the fund and has a member balance in excess of $1.6M as you will be directly impacted by these changes with effect from 1st July 2017.
If you are withdrawing a pension and are approaching a member balance of $1.6M we shall also contact you to discuss actions that you may wish to take.
Please note if you have commercial or residential property within your superfund, or if you have an indirect investment via your superfund with a structure that holds property, and this has not been revalued recently this could have a direct impact on your current member account balance. Please contact us on 03 9757 5100 to discuss your fund.
Consideration also needs to be given to the changes to non-concessional contributions as this will have an impact on any members that would like to maximise the amounts they can contribute to the fund going forward.
For example if you are currently under 65 years of age and have not contributed any non-concessional amounts to your super within the last 3 years you could make a non-concessional contributions of up to $540,000 and utilise the 3 year bring forward rule prior to 30th June 2017, irrelevant of your current member balance.
Post 1st July 2017 if your current member balance within your superfund is for example $1.4M you will only be able to contribute further non concessional contributions of $200,000 as you will of reached the maximum allowable member balance of $1.6M. The rules will now prevent you from being able to contribute any further non concessional contributions.
Please ensure that you contact us if you wish to make non concessional contributions to your fund prior to 30th June 2017 so we can review your individual circumstances and advise you accordingly.