On 1 July 2017, the biggest changes to superannuation rules in 10 years will come into effect. They touch on everything from super contributions to pension drawdowns.
CONCESSIONAL (PRE-TAX) CONTRIBUTIONS
One of the major changes to superannuation will be the changes to caps on concessional (pre-tax) contributions. SMSFs have until 30 June 2017 to make extra concessional super contributions under the current caps which are $30,000 for those who are under 49 years of age
at 30 June 2016, and $35,000 for those who are older.
All concessional, (pre-tax) superannuation contributions will be capped at $25,000 per annum when the changes to caps take effect from 1 July 2017.
NON-CONCESSIONAL (AFTER TAX) CONTRIBUTIONS
From 1 July 2017, the annual non-concessional contribution cap will be reduced from $180,000 to $100,000 for clients with a total super balance of less than $1.6 million. Where a client’s total super balance is $1.6 million or more, their non-concessional contribution cap will be reduced to nil.
SMSFs have until 30 June 2017 to make use of the current, higher non-concessional (after tax) contributions cap of $180,000 a year, before it is reduced to $100,000.
If eligible, they can also take advantage of the current bring-forward rule and contribute up to $540,000 in non-concessional contributions.
There is no change to the current bring-forward rule which allows a window of up to two years of future after tax contributions to be contributed except that from 1 July this bring-forward cap will reduce to $300,000.
Given that clients with a total balance of $1.6 million or more from 1 July will not be able to contribute further non-concessional contributions in future years, this year may be their last opportunity to make these contributions depending on the future total balance in their fund.
The bring-forward rule will however, be limited when total super balances are between $1.4 million and $1.6 million in terms of the number of years that contributions can be brought forward.
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