Last year it was announced by the Australian Government that there will be changes to the superannuation (super) system.
This received the support of both parties and the purpose was to save money for the Government who are running deficits. This article (part 1) explains some of these changes.
1. Removal of 10% rule for personal superannuation contributions
Individuals with employment income greater than 10% of their total taxable income will be able to make personal deductible super contributions. There will no longer be need to enter into a salary sacrificing arrangement with your employer to make additional deductible super contributions.
2. Division 293 tax threshold reduced
Individuals with an adjusted taxable income of less than $250,000 will be required to pay 30% tax on their deductible super contributions, instead of 15%. This is a reduction from the current threshold of $300,000. Planning should be considered to keep adjusted taxable income below $250,000 where possible.
3. Removal of the ability to segregate assets within super
A superfund will no longer have the ability to segregate assets where any member of the fund has an account balance greater than $1.6 million. There are strategies that may be implemented to minimize the impact of this change.
4. Removal of the tax exemption on transition to retirement income streams (TRIS)
The income generated from assets supporting a transition to retirement pension will no longer be tax free. Although transition to retirement pensions will not be as attractive moving forward, there are several reasons why this will be of benefit.
For more information, call in and visit one of our accountants along the East Coast.
By Terry Murphy
Last updated February 2017