By Kimberlee Brown, SMSF Director, H&R Block SMSF Solutions

A range of super reforms became effective 1 July. These reforms affect superannuation across the board and not just those who have their super in an SMSF.

Decreased concessional contributions cap

From 1 July 2017, the concessional contributions cap, regardless of age will be $25,000. This is a reduction in current cap that allows those under the age of 49 to contribute $30,000, and those over 49, $35,000.

Concessional contributions include amounts your employer may make as compulsory super and salary sacrifice contributions as well as any personal deductible contributions you may have made if you qualify.

If you are older than 65 you will need to meet a work test to contribute to super in most cases. You need to work for at least 40 hours during 30 consecutive days at any time during this financial year to make tax deductible and non-deductible contributions to super.

Claiming a tax deduction for personal superannuation contributions

As of 1 July 2017, everyone who is eligible to contribute will be able to claim a tax deduction for personal superannuation contributions without needing to satisfy the 10% rule.

You will still be required to notify the fund of the amount you wish to claim as a deduction before the end of the next financial year or the end of the day on which the individual tax return was lodged, whichever occurs first. Make sure you keep all relevant paperwork to save stress when the time comes to see your SMSF advisor.

Making after tax contributions to super

Effective 1 July 2017, the non-concessional contributions cap has been reduced to $100,000. It then follows that now only $300,000 can be contributed over the three-year fixed period. This also means if you triggered the bring forward rule before 2016/17 but the full $540,000 was not contributed, you will be limited to a transitional bring forward cap.

Those with a total superannuation balance of $1.6 million or more will not be able to make after tax contributions past 1 July 2017.

Beware of excess contributions tax

Anyone making large superannuation contributions should exercise extreme care for any type of contributions to avoid excess contributions penalties. This can apply to any tax deductible and non-tax deductible contributions made to super. Making sure you do not exceed the contribution caps will save you both the money and time of dealing with excess contributions tax.

$1.6 million transfer balance cap and capital gains tax (CGT) relief

As of 1 July 2017, the ‘$1.6 million transfer balance cap’ takes effect, limiting the amount you can keep in the pension phase of superannuation from 1 July 2017. The $1.6 million refers to the value of the assets supporting the pension.

You should make sure that as of 1 July 2017, you only have $1.6 million in pension phase. This may require you to roll some assets currently supporting a pension back to accumulation phase. Once back in accumulation phase, the earnings on these assets will be taxed at 15 per cent.

You may be eligible for CGT relief on assets affected by the new rules.

It is essential that planned to comply with the transfer balance cap and all relevant documentation was formulated by 30 June 2017. Minutes should have been created detailing the fund members’ intent to transfer assets out of retirement phase to avoid breaching the new transfer balance cap. Minutes documenting how CGT relief is intended to be undertaken should have also been produced.

Transition to retirement income streams losing their tax-exempt earnings status

From 1 July 2017, superannuation fund members lost the tax-exempt treatment of earnings on assets that support a transition to retirement pension (TTR). Members are still be able to start new or maintain existing TTRs, and the taxing of the pension in the hands of the individual who receives it remains the same.

How can we help?

If you have any questions, require assistance or would like further clarification with any aspect of the super reforms that came into effect 1 July 2017, please feel free to call us on 1300 611 320 or email us via smsf@hrblock.com.au so that we can discuss your specific requirements in more detail.

 

Important information

This content has been prepared by H&R Block Ltd ("H&R Block"), ABN 89064268 800.The information is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice. Although every effort has been made to verify the accuracy of the information contained above, H&R Block, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained on this website or any loss or damage suffered by any person directly or indirectly through relying on this information. 

Talk to an H&R Block SMSF expert today

H&R Block is the expert on the full range of SMSF services including establishing a new self managed super fund, buying property with an SMSF and meeting annual compliance and tax obligations.

Find out more

Talk to an H&R Block SMSF expert today

H&R Block is the expert on the full range of SMSF services including establishing a new self managed super fund, buying property with an SMSF and meeting annual compliance and tax obligations.

Find out more