Australia: Superannuation Changes Effective July 1, 2017

January 31, 2017:

Superannuation (retirement pension) is one of the most important benefits in the Australian employee benefits market and will undergo a number of reforms in 2017. All currency amounts listed below are in Australian dollar.

Concessional Contributions

Concessional contributions are the contributions made to superannuation before tax is applied. This includes an employer’s compulsory contributions, additional employer contributions and any contributions made by the employee from their own before-tax salary. The changes to these types of contributions include:

  • High income earners will pay additional contributions tax on amounts over $250,000.
  • Employees aged 49 and under will lower the annual contributions cap to $25,000.

Non-Concessional Contributions

These types of contributions are normally made from savings, investments or inheritances. Typically, these items have already been subjected to tax. Non-concessional contributions can be a significant way to build up a superannuation fund balance, especially in the final years leading up to retirement.

  • Yearly cap for non-concessional contributions will decrease from $180,000 to $100,000 per year.
  • The “bring forward” rule will also be changing: 3 years worth of contributions can still be made at one time during a three year period at any age under 65, but it will be limited at $300,000.
  • Total cap on non-concessional contributions will be $1.6 million.

Other Changes:

  • LISTO: Low Income Superannuation Contribution (LISC) will be replaced with the Low Income Superannuation Tax Offset (LISTO). This will allow people with low incomes (up to $37,000 per year) to be refunded for tax paid on their concessional contributions in an amount up to $500 per year.
  • All individuals under 65 years of age, and all those 65-75 who pass the work test, will be able to claim a tax deduction for personal contributions to eligible superannuation funds up to the concessional contributions cap.
  • Starting July 1, 2018, people will be able to “catch-up” their superannuation contributions. People with balances of less than $500,000 before the beginning of a financial year will be able to carry forward unused concessional cap space for up to 5 years.
  • Spouses will be able to make contributions to their spouses superannuation funds, as long as the spouse receiving the funds has an annual income of less than $40,000. Currently these types of contributions can only be made if the receiver is an income of $10,800 or less.

To find out more information on these and other superannuation reforms in Australia, please visit the Australian Government’s website here.

If you have questions on any of these changes, please get in contact with Asinta Partner in Australia, CA Financial Services Group. They can get all of your questions answered. You can contact them via their contact page.