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super changes

Super changes. Are you covered?

Chris Morcom
Partner/Private Client Adviser
13 Jun 2017

The deadline is looming. If you haven’t yet reviewed your superannuation strategy there’s still time… just. By 30 June you will need to have made changes to your super to ensure you’re not caught short.

Whether you’re the trustee of a SMSF or a member of one of the big superannuation funds there are several things to consider:

  1. Contributions
    • Concessional Contributions
      • This financial year: If you’re under 50, the maximum concessional contribution is $30,000. If you’re over 50, it’s a maximum of $35,000.  Ensure your contributions are banked by 30 June to count for the current financial year.
      • Next financial year the maximum concessional contribution cap will be $25,000. No matter your age.
      • Those who have salary sacrifice arrangements in place need to check to ensure they will not exceed the new cap next year.
      • If you’re self employed you can make personal tax-deductible superannuation contributions up to the maximum limits.  This could be a way to tax effectively build your retirement asset base.  There is paperwork required to be completed by your SMSF and there are rules that prevent those who earn a salary to access these contributions.
      • Note that from 1 July, the restriction on salaried members claiming a tax deduction for personal contributions will no longer apply.
    • Non-Concessional Contributions
      • For the current year those under 65 can contribute $180,000 as a non-concessional contribution. Or bring forward two future years into the current year and contribute $540,000.
      • From 1 July, the maximum non-concessional contribution will be $100,000, and the maximum three-year bring forward cap will be $300,000.
      • Those wishing to maximise their superannuation contributions should review the timing of contributions accordingly.
    • Total Super Balance Cap
      • From 1 July 2017, you will no longer be able to make non-concessional contributions should your total superannuation balance be greater than $1.6 million.
      • If you are close to this new limit you should review your intended contributions and consider bringing forward your non-concessional contributions to this financial year.
    • Contribution Splitting
      • With the new cap on superannuation balances, the splitting of contributions between spouses becomes more desirable.  This can assist in equalising superannuation balances over time.
      • The splitting of contributions must occur in the year following the year in which the contributions were made.
      • You can split a maximum of up to 85% of your concessional contributions each year.
  2. Minimum Pension Payments
    • SMSF trustees need to ensure that their pension members receive at least the minimum required pension prior to 30 June.  The table below provides a summary of the minimum pension required:

      (at 1 July 2016)

      Percentage of account balance

      Under 65


      65 – 74


      75 – 79


      80 – 84


      85 – 89


      90 – 94


      Over 95


  1. Transition to Retirement Pension changes
    • For those who are receiving a pension but are yet to meet a full cashing restriction (that is, their pension is a Transition to Retirement (TTR) Pension) there are changes occurring from 1 July 2017.The key change is that tax exemption on investment earnings for TTR pensions will cease from 30 June 2017.  This means that earnings on such pensions will be taxed at 15%, the same as if the balance was held in accumulation.

      This makes a TTR pension strategy less attractive and members should consider commuting (stopping) their pension and rolling the amount back into their SMSF accumulation account.

      Be mindful that the minimum pension must be paid from a TTR pension prior to its being commuted back to the accumulation phase.

    • Importantly, if a member has met a condition of release then their TTR pension may actually now be an account based pension.  Such a condition of release includes reaching age 65 or permanently finishing paid employment. Trustees should review their member’s age and employment position to ensure TTR pensions are appropriately recorded as such, so that investment earnings are appropriately taxed for the 2017/18 year onwards.
  1. Pension balances over $1.6 million
    • For those with total retirement pension balances over $1.6 million, action is required before 30 June.  This limit is referred to as an individual’s “Transfer Balance Cap”.
    • Under the new superannuation legislation, the maximum an individual can have in total retirement pensions is $1.6 million.  The excess in pension accounts over this amount should be commuted and rolled back to the accumulation account for that member or withdrawn from superannuation.
    • A valid commutation request in writing should be made prior to 1 July 2017 to ensure compliance with the new super legislation.
    • There are special rules for those who receive a retirement income stream from a defined benefit source, such as retired government employees.  Care should be taken by those who have both defined benefit pensions and SMSF balances to ensure their total retirement balance is not more than $1.6 million.  Advice from a financial planner or SMSF specialist is essential.
  2. Valuation of Fund assets
    • It is important that super fund trustees appropriately value fund assets at the end of each year, especially considering the new legislation starting on 1 July.  Reference to the ATO Publication “Valuation guidelines for SMSFs” can assist trustees.
    • For those who make changes to their pension strategy (either their TTR or for those with over $1.6 million in pension accounts) to comply with the new legislation, the trustee can revalue the cost base of assets to their market value.  There are reasonably complex rules in relation to these revaluations, and advice from a professional financial planner or superannuation specialist is a must.
  3. Estate Planning
    • When making changes to pensions to comply with the new rules, super fund members should consider the impact on their estate planning arrangements.  In particular, if a member is commuting a pension that would have been reversionary to their spouse, they should check their benefit nominations to ensure the transfer of their accumulation balance on death continues to be in line with their wishes.
    • In addition, reversionary pensions can also impact a member’s Transfer Balance Cap and need to be considered in the context of estate planning.
  4. SMSF Investment Strategy
    • Trustees should also take the opportunity to review their SMSF investment strategy to ensure it continues to reflect the needs of members, considers the insurance needs of the SMSF members and is in writing.

What’s the next step?

The “To Do” list for SMSF trustees and mainstream superannuation fund members is a long one.  Don’t leave your planning to the last minute as you might not get it all done in time.

At Hewison Private Wealth our financial advisers have been spending the past few months reviewing all our SMSF clients. We will have completed most, if not all, by the week’s end.  If you are unsure about your SMSF position, or what action to take, I recommend you call your financial adviser.

Hewison Private Wealth are independent financial planners and a boutique wealth management firm. Our financial advisers specialise in financial planning, investment advice and self managed super funds (SMSF). If you’re interested in speaking to one of our financial advisers please contact us on 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.au

The information provided above is general information only.  It does not consider your needs, financial situation or objectives. You should seek specialised advice from a qualified financial adviser.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.