Find out how recent changes to super rules could impact you.
Superannuation changes from 1 July 2018
Downsizers can put more money into super
Usually, people aged 65 to 74 need to satisfy a work test to make voluntary super contributions, while those aged 75 and over are generally unable to contribute to their super.
However, that changed on 1 July 2018, with people aged 65 or over now able to make a non-concessional contribution to their super of up to $300,000 using the proceeds from the sale of their main residence, regardless of their work status, super balance, or contribution history.
For couples, both spouses can take advantage of this opportunity, which means up to $600,000 per couple can be contributed toward super.
To qualify, the contracts of sale must be exchanged on or after 1 July 2018. On top of that, the property that’s sold also needs to have been your (or your spouse’s) main place of residence at some point in time, and you need to have owned the home for at least 10 years.
Tax incentives for first home buyers
Eligible first home buyers can now withdraw voluntary super contributions that they’ve made since 1 July 2017 (up to a certain limit) to put toward their first home.
Under the First Home Super Saver Scheme (FHSSS), first home buyers who make voluntary contributions of up to $15,000 per year into their super can withdraw these amounts (in addition to associated earnings) from their super fund to help with a deposit on their first home.
If eligible, the maximum amount of contributions that can be withdrawn under the scheme is $30,000 for individuals or $60,000 for couples (plus the associated earnings).
To be able to withdraw this money, first home buyers must apply to the Australian Taxation Office and if they are eligible, a one-time-only withdrawal is permitted under the scheme.
Due to superannuation’s favourable tax treatment, this initiative may help first home buyers to build a deposit more quickly and supplement their savings outside of super.
Superannuation changes from 1 July 2017
Contribution caps were reduced
You can no longer add as much money into your super each year as in the past due to reduced super contribution caps.
What your employer pays into your fund (under either the Superannuation Guarantee, or what you ask them to contribute from your before-tax salary via a salary sacrifice arrangement), as well as personal contributions which you claim a tax deduction on, all count toward your concessional super contributions cap.
Personal contributions that you’re not claiming a tax deduction for count toward your non-concessional contributions cap.
Below is a high-level summary of the new contribution caps.
Cap from 1 July 2017
$25,000 per financial year
$100,000 per financial year
But there are a few exceptions to these caps. You can’t make non-concessional contributions into your super at all if your total super balance is $1.6 million or above as at 30 June of the previous financial year, and if you’re 65 or over at the time of making a contribution, you must satisfy a work test in order to contribute to your super, unless you're making an after-tax 'downsizer' contribution (as explained above).
In addition, if you’re under age 65, you may be able to make a non-concessional contribution of up to $300,000 in one year if you choose to use three years’ worth of caps at once under the bring-forward rules.
The tax-offset for contributing to your spouse’s super is now more widely available
If you make a non-concessional contribution into your spouse’s (including de-facto) super account, you’re potentially entitled to a maximum tax offset of $540.
Previously this only applied if the receiving spouse earnt $10,800 or less per year, but your spouse can now earn up to $37,000 to qualify you for the full offset, or less than $40,000 for a partial offset.
In order to be eligible, you must both be Australian residents, and the receiving spouse must either be aged under 65 or meet the work test requirements it they’re aged 65 to 69 (inclusive).
Ability to claim tax deductions on personal super contributions extended
Most Australian workers who are eligible to contribute to super can now claim a tax deduction for their personal super contributions made using after-tax money, such as a transfer of funds from your bank account into your super. This money could come from savings, an inheritance, or from the proceeds of the sale of an asset, for example.
Prior to 1 July 2017, only the self-employed, unemployed, retirees and those earning less than 10% of their income from employment-related activities could claim this deduction.
But most people can now claim a personal tax deduction for the amount of their super contributions through their tax return. This will result in a reduction in taxable income and, therefore, in personal income tax liability for the relevant year.
Because personal contributions to your super fund (which you claim a tax deduction for) will only be taxed at 15%, this produces broadly the same tax benefit offered by salary sacrificing from before-tax dollars into your super.
This incentive is generally now available to anyone between the ages of 18 and 75, with people aged 65 and over required to meet the work test.
If you’re claiming a tax deduction for a personal super contribution, the contribution will count towards your concessional contributions cap of $25,000.
The tax on concessional super contributions increased for some high-income earners
Those earning $250,000 or more annually now pay an extra 15% tax on concessional super contributions (on top of the concessional rate of 15%), bringing the tax rate on those contributions to 30%. Prior to 1 July 2017, this only applied to those earning $300,000 and above.
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