Will you be affected by the Transfer Balance cap?

From 1 July 2017, there will be a cap on the amount of accumulated Superannuation an individual can transfer into the tax-free retirement phase. The total amount an individual can transfer into retirement phase will be $1.6million. Any earnings on balances outside of the new cap, left in Super, can remain in an accumulation account, where they will be taxed at 15%, or can be moved outside the Superannuation system.

There are transitional arrangements where those who have already retired with balances below $1.7m on June 30 2017, will have  6 months (from 1 July 2017) to bring their retirement phase balances under the new cap of $1.6m.

Example:-

Louise, 62, retires on 1 November 2017. Her accumulated superannuation balances is $2million. Louise can transfer $1.6million into a retirement phase account, the remaining $400,000 can remain in an accumulation account where earnings will be taxed at 15%.

Alternatively, Louise may choose to remove all or part of the extra $400,000 from superannuation.

Note that subsequent earnings on balances in the retirement phase will not be capped or restricted. The minimum drawdown will apply.

If you believe this may affect you or you would like to discuss this further, please call one of our trusted advisers before 1 July 2017.

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Earning close to or over $250,000

• Change to Division 293 income threshold

Currently, individuals with income and concessional superannuation contributions greater than $300,000 will trigger a Division 293 assessment.

From 1 July 2017, the government will lower the Division 293 income threshold to $250,000. An individual with income, and concessional superannuation contributions, exceeding the $250,000 threshold will have an additional 15% tax imposed on the lesser of:

1. the excess, or
2. the concessional contributions (except excess contributions).

The ATO will send an email or SMS to individuals who will receive their first Division 293 tax assessment or, who will receive it in myGov if they have linked their account to the ATO. These emails and SMS will only issue during peak assessment periods – you may have already received one in November 2016 or could do so between April and early June 2017.

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