The document summarizes recent changes to Australia's superannuation system announced in the 2016 federal budget. Key changes include lowering the concessional contributions cap to $25,000 per year, introducing a $1.6 million transfer balance cap on superannuation that can be transferred to pension phase, and implementing a $500,000 lifetime cap on non-concessional contributions. The changes aim to simplify the system, reduce tax concessions, and ensure superannuation is used primarily for retirement. Many of the changes will take effect on July 1, 2017, though some provisions are delayed or still require legislation.

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Superannuation –
Where is it now?
Clive Todd
November 2016

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Major Budget Announcements
 Cutting the concessional contribution cap
to $25,000 per year
 Introducing a superannuation transfer
balance cap of $1.6 million on the amount
of superannuation an individual can
transfer into pension phase
 Implementing a lifetime cap of $500,000
for non-concessional contributions (NCC)

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 Ceasing the tax exemption on earnings for assets
supporting Transition to Retirement Income
Streams
 Removing the “work test”: so all individuals can
contribute up until the age of 75
 Increasing access to concessional contributions
allowing employees to make personal concessional
contributions
 Lowering the income limit to $250,000 for the
extra contributions tax
 Allowing catch-up of concessional contributions
 Delayed

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 Except catch-up concessional contributions
which will be effective from 1 July 2018
 Effective 1 July 2017:

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What didn’t change?
 Tax-free withdrawal for over 60’s
 Maximum tax rate on earnings still 15%

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What is happening to non-
concessional contributions?
 Annual limit reduced to $100,000 from 1 July
2017
 “Bring forward” rule available for under 65’s
 No NCC once Total Superannuation Balance
(TSB) is $1.6 million
 Current limits of $180,000 remain for 2017
financial year

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Non-Concessional Contributions
TSB on 30 June
2017
Non-concessional
contributions cap
for the first year
Bring forward
period
Less than $1.4
million
$300,000 3 years
$1.4 million to less
than $1.5 million
$200,000 2 years
$1.5 million to less
than $1.6 million
$100,000 No bring forward
period, general non-
concessional cap
applies
$1.6 million or
more
Nil N/A

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Transfer Balance Cap (TBC)
 Draft legislation introduces 23 new
definitions
 Available capacity tracked via Transfer
Balance Account (TBA)
 $1.6m limit a member can transfer into a
tax-free pension

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Transfer Balance Cap (TBC) (Cont)
 If cap exceeded then notional earnings
taxed
 Excess can remain in accumulation
 TRIS’ don’t count
 Will be indexed (but apportioned if already
used)
 CGT Relief will apply to amount converted
to accumulation

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When will we see it?
 Passed the House of Reps (22/11/2016)
 Enshrining “Objectives of Superannuation”
in legislation delayed until February 2017
 Passed the Senate (23/11/2016)

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Labor’s Proposed Super Policy
 Reduce annual NCC limit to $75,000
 Extra contributions tax to apply to people
earning over $200,000
 Don’t support:
 Carry forward of concessional contributions
 Removal of 10% rule

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Practical Results of Changes
 Many Transition to Retirement Income
Streams will cease
 Focus on meeting “retirement” condition of
release
 Equalising of member balances
 Non-concessional contributions
 Contributions splitting
 Maximum NCC to be made prior to 30 June
2017

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 Increase in Limited Recourse Borrowing
Arrangements
 Administrative burden
 Greater emphasis on planning and
restructuring
 Small business CGT concessions
unchanged – making it even more valuable
 More insurance outside of super

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Disclaimers
This document contains information in summary form and is therefore intended for general guidance only. It is
not intended to be a substitute for detailed research or the exercise of professional judgement. It does not
purport to be comprehensive or to render professional advice. The reader should not act on the basis of any
matter contained in this publication without first obtaining specific professional advice.
We believe that the statements made by us in this document are accurate but no warranty of accuracy or
reliability is given. Our conclusions are based on interpretations of accounting standards and other relevant
professional pronouncements and legislation current as at the date of this document. Should the interpretations,
accounting standards, other relevant professional pronouncements or legislation change, our conclusions may not
be valid. We are under no obligation to update the matters considered in this document after its publication.
© Hanrick Curran, November 2016
All rights reserved

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