In 2016 the Federal Government legislated a range of changes to the super system. Most of these changes came into effect on 1 July 2017.
While these changes may create feelings of uncertainty, you can still save effectively for retirement – or continue to draw down your savings if you’re already retired. In fact, some of these changes may offer new or different ways to make the most of your super.
For information about the 2017 Federal Budget changes to super, please go here.
Concessional contribution cap reduced

From 1 July 2017

The concessional cap (for before-tax contributions) has been lowered to $25,000 for all Australians, regardless of age. If you contribute over this amount, you will have to pay extra tax.

From 1 July 2018 onwards you can also ‘carry over’ unused portions of your cap for up to five years, as long as you have less than $500,000 in super. For example, if you use $10,000 of your $25,000 cap in the 2018/19 financial year, you will have $15,000 left over to carry over into the 2019/20 financial year.

Before 1 July 2017

Previously, under-50s could pay a maximum of $30,000 in concessional contributions towards their super each financial year. For those 50 and over, the cap is $35,000.

Your concessional contribution cap includes super guarantee (SG) payments made by your employer, plus any extra contributions you make out of your before-tax income, either as salary sacrifice or other deductible personal contributions. These contributions receive concessional tax treatment and are limited by the cap.

What does this mean for you?

Often, our super needs a helping hand – which is why you can make voluntary contributions to super.

The new concessional cap makes it more important than ever to plan ahead. Consistently taking advantage of the caps can help grow your income for the future.

Non-concessional contribution cap reduced

From 1 July 2017

The non-concessional contribution cap (for after-tax contributions) has been lowered from $180,000 to $100,000 for each financial year. (These types of contributions often come from savings, redundancy payouts, inheritances or sales of property or other assets.)

Note that you won’t be able to make any non-concessional (after-tax) contributions to super if your super balance was above $1.6 million as at 30 June of the previous year. If you do make non-concessional contributions these will be regarded as exceeding the contributions cap, meaning you may have to pay extra tax.

The ‘bring forward’ rule, where you can bring forward up to three years’ worth of contributions, will reflect the updated non-concessional contribution cap. This means the maximum you can contribute after tax over a single financial year will be $300,000, using this three-year bring forward rule.

If you have already triggered the ‘bring forward ‘rule but haven’t used up the full amount before 1 July 2017, transitional arrangements will apply and the amount of ‘bring forward’ available will be reduced to reflect the new cap.

If you are aged 65 to 74 you can only make voluntary contributions to super if you satisfy the work test.

Before 1 July 2017

You could contribute up to $180,000 to super from your after-tax income each financial year.

These contributions were not taxed going into super because you had already paid income tax. After-tax contributions can generally be made via direct debit, payroll deduction or BPAY.

Those who were under age 65 could ‘bring forward’ up to three years’ worth of after-tax contributions in a single financial year – meaning they could contribute up to $540,000.

What does this mean for you?

If you have an existing contribution strategy in place, you may want to review your plans. This could be particularly important if you normally contribute up to the cap limit, or were planning to in the future.

Remember, some financial planning strategies are only available to couples. If that’s you, it could be a good idea to seek advice together. For some, this could be the last opportunity to make an after-tax contribution before things change on 1 July.

New tax on earnings in transition to retirement (TTR) income streams

From 1 July 2017

From 1 July, earnings in TTR arrangements are subject to a concessional rate of tax up to 15% – the same rate paid on earnings in your super accumulation account. This change applies to both new and existing TTRs.

Before 1 July 2017

Previously, earnings on super in TTRs were tax free – like earnings in full account-based pension accounts.

What does this mean for you?

If you already have a TTR, you may like to consult with a financial planner through CareSuper to see whether this is still the right option for you and check if you meet a condition of release to qualify for an account-based pension, where earnings are tax-free.

If you’re considering a TTR, it could still be a good option depending on your age, situation and marginal tax rate.

New $1.6M transfer balance cap for pensions

From 1 July 2017

The total amount of money you can transfer from super to a tax-free pension environment will be limited to $1.6 million. This cap will increase in $100,000 increments in line with the Consumer Price Index (CPI). The $1.6m transfer balance account does not apply to transition to retirement income streams.

If you have a public sector pension fund or other income stream arrangement outside of CareSuper, this will also count towards your total cap.

If you have an existing pension balance of over $1.6 million (in one or more funds) you will need to consider your options to reduce the balance to $1.6 million or less. You may be able to roll money back into an accumulation account, or withdraw funds to reduce the balance.

If the value of your pension is currently between $1.6 and $1.7 million at 1 July, you will have six months starting from 1 July to remove the excess without penalty under a transition arrangement.

Before 1 July 2017

Before 1 July, there was no maximum limit on the amount you could transfer from a super accumulation account to a tax-free pension account.

What does this mean for you?

If you’re a pension member with a balance of $1.6 million or more, you will need to take action before penalties apply. CareSuper is here to help you manage this change.

There will be a transition period for some affected members, but if you have a financial planner through CareSuper (or would like to make an appointment) it’s a good idea to get in touch early.

Lower threshold for high income earners tax

From 1 July 2017

If the total of your income and before-tax contributions exceeds $250,000, you will be required to pay an extra 15% tax on super contributions (up to 30%). The ATO will contact you if you are affected by this change. Generally, you can pay the extra tax from your super fund.

Before 1 July 2017

The threshold for high income earners tax was $300,000.

What does this mean for you?

If you’re nearing the $250,000 threshold, it might be a good idea to seek advice on your contribution strategies and retirement planning to make sure your current arrangement continues to work for you.

More access to the tax rebate on spouse contributions

From 1 July 2017

More Australians are able to access the tax offset on spouse contributions.

You can apply to claim the rebate of up to $540 if you make super contributions for a spouse whose total earnings are less than $40,000 (an increase from $13,800).

Other conditions apply – and remember, contributions made to your spouse’s super count towards their non-concessional contribution cap.

(‘Spouse’ includes de facto and married couples.)

Before 1 July 2017

You could claim a tax offset of up to $540 if you contributed to your spouse’s super account and their total earnings were less than $13,800.

What does this mean for you?

For many couples, particularly those with irregular working patterns, this change provides additional opportunities for evening out super account balances and building retirement savings together.

Greater deductibility for personal contributions to super

From 1 July 2017

More Australians can claim a tax deduction on personal contributions to super.

Before 1 July 2017, these types of deductions were generally only available to the self-employed, who have to meet certain conditions including percentage of income from salary/wages.

This condition has been removed, meaning other workers, including split-income earners, contract workers and full-time employees, can now claim this tax deduction.

This change also provides an alternative for those who can’t access salary sacrifice arrangements through their employer (more below).

Before 1 July 2017

You could apply to claim a tax deduction for personal contributions to super if less than 10% of your income comes from salary and wages.

If you were self-employed and paid your own super, you were more likely to qualify for this tax deduction, compared to an employee whose income from salary/wages would generally exceed 10%.

What does this mean for you?

This change allows everyone to make concessional contributions and gives you the flexibility to ‘close the gap’ if your concessional contributions (including SG) are below the cap near the end of the financial year.

These contributions are treated as concessional contributions, so the $25,000 cap will apply, and you also have the opportunity to carry over unused portions of your cap.

Keep in mind that the higher income earners tax still applies to these contributions.

  • Want to better understand the possible tax benefits? A financial planner could help.
  • Download a Notice of intent to claim a deduction form from the ATO or CareSuper.
LISTO to replace LISC

From 1 July 2017

On 1 July, the LISC was replaced by the Low Income Superannuation Tax Offset (LISTO).

The LISTO will continue to ensure that lower income workers generally don’t pay more tax on their super than on their take-home pay.

Before 1 July 2017

The LISC aimed to help low income earners save for their future by compensating them for the tax paid on compulsory super guarantee contributions. The LISTO offers a similar arrangement, information on which is available on the Australian Taxation Office’s website.

What does this mean for you?

You don’t need to apply for the LISTO. If you are eligible and CareSuper has your tax file number, the Government will make the payment automatically.

  • If you are a low or middle-income earner, you may also qualify for the super co-contribution. Find out more.
Where can you go for help?

Through CareSuper, you have access to IFS financial planning services.* Your membership covers basic over the phone advice on super-related topics, including contribution strategies.

For more comprehensive advice you can meet with a financial planner in person or over the phone or web. They can help you with your retirement plan, taking into account your personal situation both inside and outside of super.

Your first appointment is cost- and obligation-free. If you decide to continue with advice, your planner can provide a quote for services going forward – with no hidden costs. The time taken to provide you with quality advice is based entirely on your needs – not your account balance.

Don’t want advice?

You can also call our customer service team for more information about the changes.

In 2016 the Federal Government legislated a range of changes to the super system.