Wealth Intelligence

Superannuation changes: Keep calm. And do nothing, for now.

Don't worry about the US election result...

...a bigger influence on your wealth will be Australia's new superannuation changes.

Key points

  • Parliament about to vote on major superannuation changes
  • Most changes effective 1-Jul-17
  • There will be much media about what, or not, to do
  • Changes will, for many, be complex and require advice
  • Until legislation is passed and certainty exists, do nothing 

What's happening

Australians are about to be bombarded with media news about the new superannuation changes.  And with media-advice about what to do.

First Samuel’s advice, for now, is to do nothing.  Wait for the fine print.

Image result for image do nothing

...until we give you advice

Since our Wealth Intelligence article in May this year (Wealth Intelligence - May Budget: What You Need to Know), there have been some major changes to the original superannuation regime proposals made in the May Federal Budget.

Draft legislation was made available for industry comment (which has ended) and the legislation to be introduced into Parliament today.  It is likely that everything will be finalised before Christmas.  Although one can never predict with certainty how the Senate will act.

Major items

  • The proposal for a lifetime cap on non-concessional contributions of $500,000 (backdated to July 2007 included) will not proceed
  • The current non-concessional contribution rules continue to apply until 30-Jun-17
  • From 1-Jul-17, the annual non-concessional contribution will be $100,000 p.a. with the ability to bring forward 3 years contributions
  • A superannuation pension balance cap (‘transfer balance cap’) of $1.6m (initially) will apply from 1-Jul-17.  Superannuation balances in excess of this amount will have their earnings taxed as in accumulation phase
  • No non-concessional contributions will be allowed if a member’s superannuation balance exceeds the transfer balance cap... and there are some tricky rules to be aware of as you approach the transfer balance cap figure
  • The annual concessional contribution cap will fall to $25,000
  • The 30% contributions tax will apply to annual compensation of greater than $250,000 p.a.
  • The "work test" for those aged between 65 and 74 will continue to apply (the "work test" requires you to be employed for 40 hours over a 30 day period before you could contribute)
  • Allowing a catch-up of concessional contributions (for those with a superannuation balance of less than $500,000) has been deferred to 1 July 2018
  • '10%' rule will be removed, making it easier to claim deductions for personal contributions up to the concessional contribution cap

Got all of that?

What now?

And so we re-iterate: be intentional. Do nothing until all the detail is known.  

Once the detail is known we will contact each First Samuel client.  (We have already begun discussing these matters with clients at their review meetings.)  

We will analyse the impact of the changes on your wealth strategy.  And recommend changes, if any.

As always, if any matters are of concern, or you would like further clarification, please contact your Client Strategist: Nikki, Simon, Jack, Jenny or me.