Superannuation – The new rules and what you need to do next

by David Buchanan, Director

Major changes to superannuation were legislated in late 2016. They come into effect on 1 July 2017.

While the media hype around super may have subsided, the need for action hasn’t. If you have a superannuation fund balance of $1.6M, you wish to salary sacrifice to the maximum cap allowance, or you’d like to utilise non-concessional caps, you should take advice now so that you have time to implement appropriate strategies well in advance of the June 30 deadline.

There is now a brief and rapidly closing window of opportunity for you to review your superannuation strategy and take advantage of the current rules before they change on July 1, 2017.

The new legislation will impact individuals who:

  • have superannuation fund balances that exceed $1.6M;
  • salary sacrifice or plan to maximise their concessional contributions (and may be at risk of exceeding the allowable concession cap);
  • wish to make the most of their non-concessional contributions; or
  • wish to utilise reserving strategies for their SMSF.

Change heralds a raft of positives and negatives and you will need advice about both the opportunities and impacts.

In terms of positives, the removal of the 10% eligible income test and the introduction of the 5-year concessional contribution catch-up provision provide significant benefits.

By removing the 10% eligible income test, the government is allowing more people to contribute to superannuation, and by association, claim a superannuation tax deduction. The outcome will be an increased super balance.

The 5-year concessional contribution catch-up provision will also prove advantageous, especially for those who are unable to maximise their contributions every year. That is, if your concessional contribution is less than the maximum amount allowed in a given year you will be able to ‘top up’ the following year’s contribution with the unused amount. Rather than miss out on the full benefit of a year’s super contribution, you’ll grow your superannuation balance the following year while benefiting from the increased tax deduction.

It has been widely reported that contribution caps for both concessional and non-concessional contributions will be further reduced from July 1, 2017. If you salary sacrifice or you wish to make the most of the current caps, seeking advice will help you to avoid contributing too much and putting yourself at risk of an excess contributions tax penalty.

Similarly, if you are thinking of utilising SMSF reserving strategies, care must also be taken not to exceed the contribution cap as tax penalties also apply.

For superannuation funds and SMSFs that have individual balances in excess of $1.6M, the new legislation impacts upon the amount that may be paid as a pension to those members. There are also a number of matters that must be addressed to remain compliant with the SIS rules.

Finally, the removal of tax exemptions from earnings that support transitioning to retirement (TTR) plans will also need careful consideration. In a situation where transactions are no longer tax free, a SMSF may be required to pay significantly more tax which will result in less funds being available for member benefits.

By resetting the Capital Gains Tax cost base of assets that support your TTR plan, there is the potential to minimise your future Capital Gains Tax on their eventual sale.

These are just some of many changes to superannuation that you must now consider. May I invite you to contact DLA Partners to find out how the new rules affect your individual circumstances. Please phone (07) 3863 9444 or email