Superannuation - The Final Moments...

Superannuation ‘the final moments’
Garvin Jones | Director - Superannuation| 8 June 2017

Superannuation – busting common myths
 Recap – changes effective 1 July 2017
 $1.6M - what does it really mean?
 2017 budget
 When can I get the cash?
 Opportunities
 Questions?
Twilight Seminar | Superannuation | 8 June 2017 | 3

Recap – it all starts in 23 days time
 Concessional Contribution caps - $25,000
 Non Concessional Contribution Cap - zero to $300,000?
 $1.6 million Cap on Pension balances
 No more tax free earnings for Transition to Retirement
 Division 293 tax threshold, $250,000
 ‘10% test’ removed
4Twilight Seminar | Superannuation | 8 June 2017 |

Things that have not changed – business as usual
 Contribution caps up to 30 June 2017
 Tax free pensions and Lump sums – 60 and over *
 Minimum pension drawdown factors
 Access to Super benefits
*different rules for defined benefit pensions

Non-concessional contributions

Non-concessional contributions (NCC)
7
Up to 30 June
2017
From 1 July
2017
Member
Balance
˃$1.6M
n/a ZERO
Age up to 65 $180,000 /
$540,000
$100,000 /
$300,000
Age 65 – 74* $180,000 $100,000
*Work test from age 65
Twilight Seminar | Superannuation | 8 June 2017 |

Non-concessional contributions (NCC)
 Last chance to use existing caps $180k / $540k
 Lower caps from 1 July 2017
 Beware transitional caps for bring forwards triggered in 2015/16
and 2016/17
 Total super > $1.6M, NCC is not available
 Include all super when testing $1.6M balance
8Twilight Seminar | Superannuation | 8 June 2017 |

Concessional contribution (CC) caps
Existing to New**
Age 30 June 2017 From 1 July 2017
49 – 74 *$35,000 *$25,000
< 49 $30,000 $25,000
* Work test from age 65
** Indexed to AWOTE in increments of $2,500

Catch up concessional contributions
 Beneficial change for claiming super contributions
 Old rules to 30 June 2017, ‘use it or lose it’
 New rules ‘an averaging type arrangement’
 Allows unused amounts to be carried forward
BUT - there are conditions

 Unused portion of CC cap carried forward on a rolling 5 year period
 Not a bring forward entitlement
 “Total superannuation balance” must be less than $500K at 30 June prior
 Amounts not used after 5 years will expire
Catch up - conditions
Effective from 1 July 2018 (2019/20 first catch-up opportunity)

Example – using catch-up contributions
Frank has not made concessional contributions
He has $40K of investment income, plus a taxable capital gain of $150K in year 6.
Frank can use the catch-up provisions to claim a deduction up to $150K to reduce the
capital gain.
5 years of unused CC = $125,000
Current year CC = $25,000
Deduction for contributions $150,000

10% test - from 1 July 2017
Who can claim a tax deduction?
Member, only if; income +
benefits from “employment” are
less than 10% of total income
Member, can top-up to
concessional cap
Old
New
• Deduction to individual
• Co-contribution with employer
• Removes need for salary sacrifice

Where a capital gain arises from the sale of a business
 Opportunity for small business owners to:
• reduce capital gains and
• make contributions to super
 Complex – requires expert advice &
pre-planning
No tax on sale of business?
Seek advice
before selling
your business

Example
Dr Smith has been a GP in practice for 20 years
He has owned the business premises for 16 years
He sells his practice for $400,000 and the premises for $1million
His capital gain is $900,000
CGT Small Business Concessions

Example
If Dr Smith can access the CGT concessions -
• Contribute $1.4million to super &
• Pay no tax on the capital gain
CGT Small Business Concessions

2017 Budget – the downsizing contribution
 Commences 1 July 2018
 Extra NCC cap of $300,000
 Proceeds from the sale of your home
 Must be 65 or over
 Home must have been owned for 10 years or more
 No other caps apply, no work test
Sale of your home - $300,000 to super

Recap – Getting $ into Super
Caps on:
 Concessional contributions
 Non-concessional contributions
Additional caps available:
 CGT Small Business Concessions
 Sale of your home

Getting $ out of Super
When can I take the cash?

Retired? Do you have to start a pension?
After a retirement event a member can:
 Access their super:
- Start a pension (up to $1.6M)
- Take amounts as required (lump sums)
There is no requirement to start a pension or to take
any monies from super

What is retirement for Super purposes?
A retirement event varies depending upon the age of the
member:
 Attaining age 65 is a retirement event
 Age 60-65, ceasing a paid position of employment
 Age 55-60, depends on the members date of birth, and
the member must cease work & intend never to
work again for more than 10 hours each week
 Death is a retirement event

Transition to Retirement Pensions
 Earnings no longer tax free
 Will most stop 1 July 2017 (or before)?
 $1.6M pension cap does not apply
 NO CHANGE to the eligibility rules to commence a TRIS
 Have you triggered a retirement event?

The $1.6M cap
 It’s all about limiting tax free earnings
inside the super fund
 Members over 60 can still access tax free
super
 No requirement to remove $ from super
 No changes for members with less than
$1.6M
Dispelling the confusion

What does it affect?
 Tax free earnings limited to a $1.6M pension balance
 Pension account & Accumulation account –
Tax is payable on the proportional earnings of the Accumulation
account
 Members cannot make further NCC
 Minimum pension drawdowns are calculated on a member’s pension
balance
 Cash drawn that exceeds the minimum - should come from your
Accumulation account
The $1.6M cap

$1.6M pension cap: example
 Jane and Bob are 70
 $2m each in super
 Currently, all in pensions (one each)
 Fund earns around $250k pa
 Current rules – earnings and capital gains are tax free
 The minimum pension drawdown is $100,000 per member

Effect of $1.6m pension cap:
Jane $2m
Bob $2m
$1.6m
$0.4m
Pension*
Accumulation**
$1.6m
$0.4m
Pension*
Fund Income
now only 80%
tax free
20% ($50k)
taxable
Tax $7,500
Jane & Bob choose to keep all amounts in super...
* the minimum pension drawdown is $80,000 per member
** drawdowns in excess of the minimum allocate against accum. account
Accumulation**

$1.6m pension cap Opportunities
 ‘Even up’ balances for couples
 Contribution splitting (concessional)
 Recontribution for spouse / family
 Excess >$1.6M - leave in super or withdraw
 Multiple pensions – which ones to roll back?
 Draw minimum from pensions
 Multiple super funds?
What is there to think about?

Other pensions - special rules
Defined Benefit
Market Linked

Defined benefit pensions
 Counts as part of the $1.6million cap
 Special valuation rules
 Tax concessions to the individual members – less
generous

CGT uplift
 Review CGT position for funds > $1.6M
 Opportunity to increase CGT cost base
 ‘Strings attached’
 Complexity, detailed review recommended

Capital gains tax – some relief?
Conceptually, the relief is designed to ensure that when an asset
is sold after 1 July 2017:
• capital gains accrued post 1 July will be taxable/ tax free under
the new rules; while
• capital gains built up before 1 July will get some recognition
that they would have been wholly or partly tax free under the
old rules
• complexity involved – obtain advice

Action items
 Pre 30 June
- Make non-concessional contributions – last chance for some
- Make concessional contributions
- Pay minimum pensions
- Make election to roll back excess where pensions > $1.6M
 Post 30 June
- Revisit TRIS
- CGT relief – do you qualify, should you opt in?

About the speaker
Garvin’s extensive expertise and technical experience in income tax and superannuation makes
him a valuable advisor to his clients, including SMSFs, High Net Worth Individuals and SMEs.
Garvin’s advises clients in
• Tax planning and compliance
• Wealth creation plans
• Retirement planning
• Regulatory compliance
Garvin is passionate about helping people to plan for the transition between work and
retirement in a way that sees their financial goals achieved.
Garvin Jones - Director, BBus, CA, SMSF Specialist Advisor
Services: Superannuation
High Net Worth Individuals
and Professionals
t: +61 2 9232 5111
d: +61 2 9220 0346
e: garvin.jones@hillrogers.com.au
w: www.hillrogers.com.au

t +61 2 9232 5111 f +61 2 92337950
www.hillrogers.com.au | info@hillrogers.com.au
Level 5, 1 Chifley Square, Sydney NSW 2000 Australia
GPO Box 7066, Sydney NSW2001
H.R.P.H Pty Limited practising as Hill Rogers | ABN 12 003 718 518
Member of Morsion KSi, an associationof global independentaccounting
firms. Liability limited by a scheme approved under Professional Standards
Legislation.
Disclaimer: Hill Rogers Advisory Pty Ltd
The material contained in this publication is general commentary only for
distribution to clients of Hill Rogers. None of the material is, or should be
regarded as personal or financial product advice. Accordingly, no person
should rely on any of the contents of this publication without first obtaining
specific advice from Hill Rogers. Every effort has been made to ensure that
the content is accurate, however it is not intended to be a complete
description of the matters described. Hill Rogers, its Principals and agents
accept no responsibility to any person who acts or relies in any way on any
of the material without first obtaining such specific advice.
H.R.P.H Pty Limited practising as Hill Rogers|ABN 12 003 718 518
Member of Morison KSi, an association of global independent accounting
firms. Liability limited by a scheme approved under Professional Standards
Legislation.

Superannuation - The Final Moments...

Recommended

Recommended

More Related Content

What's hot

What's hot (17)

Similar to Superannuation - The Final Moments...

Similar to Superannuation - The Final Moments... (20)

More from Hill Rogers

More from Hill Rogers (11)

Recently uploaded

Recently uploaded (20)

Superannuation - The Final Moments...