This blog post will be the final post discussing the New Super Reforms coming into effect on 1 July 2017. This blog series will allow you to be prepared and maximise the remainder of the 2016/17 financial year in your SMSF or other superannuation fund.
Our discussion points for this post will be:
- Allowing more people to claim a tax deduction for personal concessional contributions to super and,
- Taxation of pensions supporting the Transition to Retirement Income Streams (TTR or TRIS Pensions)
Taxation of pensions supporting the Transition to Retirement Income Streams
Until 30 June 2017 if you are semi-retired and are supplementing your income through your pension, the earnings on your member account which support that pension are tax free. However, after 1st July these earnings will now be taxed at a concessional rate of 15%.
What is the new rule?
- From 1 July 2017, the Government will remove the tax-exempt status of income earnt from assets supporting transition to retirement income streams (TRIS). These earnings will be taxed concessionally at 15%.
What you need to consider
- Can you meet a ‘condition of release’ and have the TRIS converted to an account-based income stream (i.e. a full pension) and keep the earnings on your super tax free?
- Is the drawing down of the TRIS pension still appropriate from a taxation and cashflow perspective post 1 July 2017? Or should you cease this pension now given the new rules.
Allowing more people to claim a tax deduction for personal concessional contributions to super
What is the New Rule?
From 1 July 2017, the Government will allow ALL members under the age of 65, and those members aged between 65 & 74 who meet the work test, to claim a tax deduction for personal contributions made up to the concessional contributions cap of $25,000 per annum.
In the past, if you had one or more employers who contributed super for you, and the income from employers contributing super came to more than 10% of your total income, then you were not permitted to claim a tax deduction for any contributions you personally made to super. This effectively meant that you could earn $10,000 a year from employers and have SCG super paid on your behalf of $950. Then in your own name you could earn a further $70,000 but you could not claim any deduction for further contributions.
Now under the new rules you will be allowed to ‘spread’ the $25,000 tax deductible contributions limit across a combination of employer and personal contributions.
What you need to consider
- Whether you will benefit from a personal tax deduction for deductible contributions made to your fund.
This advice is of a general nature, for tailored, personal advice contact us on (07) 3862 8777 for an obligation free consultation with a qualified Self-Managed Superannuation expert.