Technical Corner – changes and opportunities for financial advisers

There are key changes around tax and superannuation which received the Royal Assent on 29 November 2016:

  • a $1.6 million cap on the amount of capital that can be transferred to the tax-free earnings retirement phase of superannuation;
  • Additional income tax rules on recipients of certain defined benefit income streams in excess of $100 000 per annum;
  • Reduction of the threshold at which high-income earners pay Division 293 tax on their concessional taxed contribution to superannuation to $250 000;
  • Transitional capital gains tax relief for superannuation funds that adjust their asset allocations before 1 July 2017. See draft Law Companion Guideline
  • Reduction of the annual concessional contributions cap to $25 000 and the annual non-concessional contributions cap to $100 000;
  • Introduction of criteria for an individual to be eligible for the non-concessional contributions cap and make minor amendments to the non-concessional contributions rules;
  • Removal of the anti-detriment deduction;
  • Amendment on how the maximum contribution base is determined;
  • Eligible low income earners to receive the low income superannuation tax offset;
  • Remove the requirement that an individual must earn less than 10 per cent of their income to be able to claim a deduction for personal superannuation contributions;
  • Enable catch-up concessional contributions;
  • Extend the spouse superannuation tax offset; and
  • Amend the earnings tax exemption for complying superannuation funds, retirement savings account providers and life insurance companies;

These changes provide an opportunity to financial advisers to review the following clients who have the following strategies in place:

  1. Salary sacrifice arrangements
  2. Contribution strategies through West State Super
  3. Transition to Retirement strategies
  4. Pension accounts close to or over $1.6m
  5. Superannuation trustees with members close to or over $1.6m