Superannuation and pension changes 1 July 2018

See what rules have come into effect and what the changes could mean for you.

A number of proposed superannuation and pension changes came to fruition this year and last. Here’s a wrap up of what has taken place.

What has changed in 2018?

Downsizers can put more money into super

Usually, those 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 those 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 for 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 were made available to first home buyers

Eligible first home buyers can now withdraw voluntary super contributions, which 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If eligible, the maximum amount of contributions that can be withdrawn under the scheme is $30,000 for individuals or $60,000 for couples (plus the associated earnings).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.

What changed in 2017?

You can no longer put as much money into your super savings on the back of reduced super caps, which came into effect on 1 July 2017.

Remember, what your employer pays into your fund (under the Superannuation Guarantee, or what you might elect them to pay via a salary sacrifice arrangement), as well as personal contributions which you claim a tax deduction on, will count toward your concessional super contributions cap.

Personal contributions that you’re not claiming a tax deduction on will count toward your non-concessional contributions cap.

Here is a high-level summary of how much you can put into super each year.

Contribution type Your age Current cap
Concessional contributions All ages $25,000 per annum
Non-concessional contributions Under age 65 $100,000 per annum and up to three years’ worth of annual caps ($300,000) under the bring-forward rules
Non-concessional contributions 65 or over $100,000 per annum

Also note, people cannot make non-concessional contributions into their super if they have a total super balance of $1.6 million or above as at 30 June of the previous financial year.

If you’re 65 or over at the time of making a contribution, a work test must still be satisfied, unless you're making an after-tax 'downsizer' contribution.

Those converting their super into a pension to derive an income in retirement can now only transfer a maximum of $1.6 million into a tax-free pension account, not including subsequent earnings.

If an individual accumulates a super balance above this limit on or after 30 June 2017, the additional savings need to remain in the accumulation phase (where earnings are taxed at the concessional rate of 15%) or be taken out of super completely to avoid potential penalties.

It’s also important to note, once an individual transfers $1.6 million into a retirement pension, even if their balance does reduce over time, they’re generally unable to top up their pension a second time.

While investment earnings on super fund assets that support a retirement pension are still tax free, this no longer applies to transition to retirement (TTR) income streams.

Earnings on fund assets supporting a TTR income stream are now subject to the same maximum 15% tax rate that applies to super accumulation funds.

Note, there are no changes to the way income payments received from a TTR income stream are taxed.

If an individual makes a contribution into their spouse’s super account, they’re potentially entitled to a maximum tax offset of $540 if certain requirements are met.

The government increased eligibility for this tax incentive by raising the lower income threshold for the receiving spouse from $10,800 to $37,000.

Most Australian workers, who are eligible to contribute to super, can now claim a tax deduction for their personal super contributions.

Prior to 1 July 2017, only self-employed people, unemployed people, retirees and those earning less than 10% of their income from employment-related activities could claim this deduction.

This incentive is generally available to anyone between the ages of 18 and 75 that is making a personal contribution, with work test requirements necessary for those age 65 and over.

Broadly, those earning $250,000 or more annually now pay an extra 15% tax on these 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 tax only applied to those earning $300,000 and above.

Previously set at age 65, the eligibility age for the Age Pension for both men and women is incrementally increasing for those born on or after 1 July 1952. This is shown in the table below:

Date of birth Age Pension eligibility age
Up to 30 June 1952 Already eligible
1 July 1952 - 31 December 1953 65 and a half
1 January 1954 – 30 June 1955 66
1 July 1955 – 31 December 1956 66 and a half
From 1 January 1957 67

The eligibility date for the equivalent Service (Age) Pension, available from the Department of Veterans’ Affairs, for those who have qualifying military service, remains at age 60.

Still have questions?  

For assistance regarding the topics mentioned above, speak to your financial adviser. And, if you don’t have one, but would like some advice, call us on 131 267 or use our find an adviser search function.

1 Super Guide – 300,000 retired Australians to lose some or all age pension entitlements paragraph 1, 3

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