Superannuation changes – no need to panic

There has been plenty of commentary and opinions (in some cases over-dramatic ones) in the last month on the superannuation changes announced in the budget. This article is not going to list or explore all the changes in detail – those can be found in our Federal Budget summary.

Regardless of what your personal views are (I for one think the $500,000 lifetime contribution cap seems a bit low), it’s time to look ahead to what the changes mean to you. So if you are an SMSF trustee and are wondering what’s next, please consider the following:

• Aside from the lifetime $500,000 non-concessional contribution limit, the changes announced do not come into effect until 1 July 2017 e.g. the $1.6m balance transfer cap and taxing earnings at 15% on transition-to-retirement accounts. So there will be some time to plan for various changes.
• The $1.6 Million cap on pension accounts is on a per-member basis and not on a total fund balance basis.
• Where applicable and appropriate make sure you maximise the higher concessional caps up to 30 June 2017 (i.e. $35,000 per year for 50’s and over and $30,000 per year for under 50s) before the lower $25,000 cap kicks in on 1 July 2017.
• Although it is not yet law, it would be prudent to abide by the lifetime $500,000 non-concessional cap, so if you are considering putting in non-concessional contributions from this point onwards you must check if you are eligible to put in any more. If in doubt, your accountant should be able to ascertain from the ATO how much of $500,000 lifetime cap you have used. Contributions dating back to 1 July 2007 are counted, but generally there is no need to worry about any contributions made before budget night. For example, if $400,000 was contributed between 1/7/2007 and 1/5/16, your remaining cap is $100,000.
• Consider splitting concessional contributions every year with your spouse in situations where one member has a disproportionate and significantly higher balance than their spouse and you are looking to equalise super.
• Keeping an eye out for the election result on July 2. If the Liberal party is elected, it’s reasonable to assume that the super changes announced in the budget will stay as is. If Labor is elected there may be a few small variations to what’s been announced (e.g. they have flagged that they will somehow make the $500,000 Lifetime contribution measure a prospective one).

In addition to the above, with 30 June 2016 approaching, just a reminder to:

• Pay your minimum pension to the relevant members in cash prior to 30 June 2016 to avoid losing the tax free status on investment earnings.
• Make all your contributions necessary prior to 30 June 2016. You may need to review your concessional contributions made after 1 July 2015 and ensure you do not go over the caps if you are looking to contribute additional amounts prior to 30 June 2016.

As always you should seek specific professional advice before undertaking any superannuation strategies or changes in light of announced changes. Contact your local Accru office if you would like to discuss further.

By Nick Petaroudas, Accru Melbourne