Financial Information Desk Manager Craig Hall concludes his three part series on the superannuation changes taking effect from 1 July.
It would be hard to have missed that the start of new financial year is bringing big changes to super.
National Seniors has detailed these changes, especially those where action could be required to avoid penalty tax, in previous editions of 50 something. Members can access these at fid.org.au.
If you haven’t already, act now if the measures will affect you. If you are unsure, contact us as soon as possible (see details at the end of this article). Below are some less publicised measures that will also come into effect on 1 July.
Anti-detriment payments abolished
Anti-detriment payments are paid as part of a lump sum benefit on the death of the member. The payment represents a refund of the 15 per cent contributions tax paid by the member over their lifetime. Only some funds offer this feature. From 1 July 2017, funds will not be able include an anti-detriment payment as part of a death benefit unless the member died on or before 30 June 2017. If this is the case, the fund has until 30 June 2019 to make the payment.
Spouse contribution tax offset threshold increase
Individuals who make Non-Concessional Contributions (NCC) of up to $3000 to their spouse’s superannuation may receive the tax offset of up to $540, provided their spouse’s income (including reportable fringe benefits and reportable employer super contributions) is below $10,800. The offset then reduces until the spouse’s income reaches the cut-off point of $13,800.
The change increases the spouse’s income threshold to $37,000 to receive the full offset. The offset will then reduce to nil at $40,000. This means more individuals can receive the offset for making NCCs to a low-income spouse’s super fund.
Personal deductible contributions
The ability to claim a tax deduction for personal super contributions is limited to those defined as self-employed or ‘unsupported’, meaning that less than 10 per cent of their income is generated as an employee.
From 1 July 2017, anyone who is eligible to make voluntary superannuation contributions can elect to claim a tax deduction for them. Contributions where a deduction is claimed are concessional contributions and attract contribution tax of 15 per cent.
Low-income super tax offset (LISTO)
The LISTO replaces the low-income superannuation contribution. This offset effectively refunds the tax on super contributions for people on adjusted taxable income below $37,000. It provides for a government contribution to the member of up to $500, which represents the 15 per cent tax on concessional contributions.
Earnings tax exemption extended to deferred income stream products
Earnings generated from a superannuation income stream in the payment phase are tax-free. From 1 July, and subject to certain eligibility conditions, the tax-free status will be extended to deferred income streams that begin the payment phase later. The member must satisfy one of the following conditions of release:
- Reaching age 65
- Terminal medical condition
- Permanent incapacity.
Death benefit from income streams
From 1 July, an amendment to the definition of a rollover superannuation benefit will ensure those receiving a death benefit payment and wanting to start a death benefit income stream will be able to change product providers. The change will allow the benefit to retain its death benefit status.
For those who take advantage of the government co-contribution, further eligibility requirements will apply. Along with existing requirements, the member must not have exceeded their non-concessional cap for that year and their super balance must not have been equal to, or greater than, $1.6 million as at 30 June of the previous year.
Members can use National Seniors’ FREE independent Financial Information Desk (FID) by calling 1300 020 110 or emailing firstname.lastname@example.org. The desk covers retirement topics from super to income streams, pensions, equity release, aged care and budgeting.
The information in this article does not constitute or imply financial advice. It is recommended that you seek professional financial advice and/or seek clarification from any relevant government department or licensed financial services provider before making financial decisions.
This article by Craig Hall originally appeared in the June/July/August 2017 edition of 50 something magazine.