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The superannuation concessional contribution cap for the 2018-19 financial year is $25,000.

Concessional contributions include:

- compulsory employer contributions (superannuation guarantee)
- any additional concessional contributions your employer makes
- salary sacrifice payments made to your super fund
- contributions you are allowed as an income tax deduction*

*  Eligible employees are now able to claim a tax deduction for contributions personally made to a superannuation fund.  The total of all concessional contributions including superannuation guarantee, salary sacrificed contributions and personal deductible contributions must not exceed $25,000 per year.

OPT-IN OR LOSE YOUR INSURANCE COVER

The Government has recently passed new legislation that now requires you to opt-in by  1 July 2019 to retain the insurance cover you  have in your superannuation fund.

If your superannuation fund account has not received a contribution from you or your employer or a rollover in the previous 16 months, superannuation funds are required by law to discontinue your cover. 

This new legislation applies regardless of your superannuation fund's balance and applies to all types of insurance; life insurance, total and permanent disability (TPD) insurance and income protection insurance.

The insurance opt in requirement is part of a reform package called Protecting Your Super Package that commences on 1 July 2019 and includes:

• Insurance becoming opt-in for members whose accounts have been inactive for 16 months
• Fund members with balances under $6,000 whose accounts have been inactive for 16 months will have their accounts paid to the ATO, who will then chase taxpayers to consolidate their superannuation accounts
• Fee caps will be imposed on certain fees for account balances under $6,000
• Exit fees will not be charged for moving money from a superannuation account

NSW GOVERNMENT REBATES

A family with two children could save $1,000 by using Energy Switch and claiming the Active Kids voucher, Creative Kids voucher and the CTP Green Slip refund.

A pensioner concession card holder could save $1,200 if eligible for the Low Income Household Energy Rebate, Gas Rebate, CTP Green Slip refund and free rego.

First and second year apprentices registered with the NSW Department of Education and Training can apply for a registration rebate to help with the costs of registering their motor vehicle.

Frequent toll users who spend on average $25 per week or more in tolls or $1,300 over the year are eligible for one free 12 months registration for a car, ute 4WD or motorcycle for registrations due between 1 July 2018 and 30 June 2019.

For more information on Service NSW Cost of Living rebates: www.service.nsw.gov.au/campaign/cost-living

From 1 July 2018, if you are 65 years old or older and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.

Your downsizer contribution is not a non-concessional contribution and will not count towards your contributions caps. The downsizer contribution can still be made if an individual has a total super balance greater than $1.6 million.

You can only make downsizing contributions for the sale of one home. You can't access it again for the sale of a second home. You or your spouse must have owned the home for 10 years or more prior to the sale.

Downsizer contributions are not tax deductible and will be taken into account for determining eligibility for the age pension.

If you sell your home, are eligible and choose to make a downsizer contribution, there is no requirement for you to purchase another home.

From the 1st of July 2017, for the first time, employees are eligible to claim a tax deduction for personal contributions made to superannuation. Until this year only self-employed people were eligible to claim this type of deduction.

To be eligible to make the claim employees must be under 65 or under 75 and still working and contributions must be received by the superannuation provider prior to the 30th of June 2018. Employees must inform their superannuation fund of their intention to claim the deduction prior to lodging their 2018 personal income tax return.

The concessional contribution cap for the 2018 financial year is $25,000. This means that the total of all superannuation guarantee contributions made by a person's employer, plus their salary sacrifice superannuation

contributions, plus their personal contributions to superannuation that they are claiming a tax deduction for, must not total more than $25,000.

On 1 July 2017, changes to the tax offset for spouse superannuation came into effect with an increase in the spouse income threshold from $10,800 to $37,000.

Taxpayers are eligible to claim the maximum tax offset of $540 if:

> they contribute $3,000 to a spouses eligible super fund, and

> the spouses assessable income plus total reportable fringe benefits plus reportable employer super contributions is less than $37,000.

Effective 1 July 2017, most individuals under 75 years of age can claim a tax deduction for personal superannuation contributions without needing to have less than 10% of their income from salary and wages.

Deductions for personal superannuation contributions are now available to taxpayers who get their income from: salary and wages, self-employment, investments, government pensions, foreign sources, and partnership or trust distributions.

Concessional contributions, including employer contributions and personal contributions for which the member claims a tax deduction, are capped at $25,000 for the 2017-18 financial year for all individuals regardless of age.

WHAT'S NEW?

From 1 July 2017, the 10% test that previously applied to personal deductible contributions has been removed. As a result, all individuals under the age of 75 (including those aged 65 to 74 who satisfy the work test) will be eligible to claim a tax deduction for personal superannuation contributions.

Prior to 1 July 2017, individuals who were employees at any time in the financial year must have earned less than 10% of their income from employment (the 10% test) to be eligible to claim a tax deduction for personal super contributions. This generally meant that only individuals who were self-employed or not employed (eg. retirees) were eligible.

Benefits

The predominate benefit of making a personal deductible contribution is that individuals are able to claim the contribution amount as a tax deduction to offset their assessable income.

The tax saving for individuals is the difference between their marginal tax rate (including Medicare levy) and contributions tax of 15% on every dollar they make as a personal deductible contribution.

CONTRIBUTION LIMITS

From 1 July 2017, the concessional contributions cap is $25,000 for all individuals regardless of age. Concessional contributions include employer superannuation guarantee contributions, salary sacrifice contributions and personal contributions for which the individual is claiming an income tax deduction.

Salary Sacrifice v Personal Deductible Contributions

In terms of tax savings, there's little difference between making ongoing salary sacrifice contributions and making regular personal contributions into super followed by a Notice of Intent to Claim within required timeframes.

However, there are some differences worth noting:

• Cashflow – Compared to salary sacrificing, making regular personal contributions from after tax income will leave the individual with less net take home income. If individuals are going to make one-off or irregular personal deductible contributions they need to save up after tax income to do so.

• Administration – both salary sacrifice agreements and personal deductible contributions have challenges. A salary sacrifice agreement must be agreed upon in advance with the employer. A personal deductible contribution requires the individual to lodge a valid Notice of Intent to Claim within required timeframes and claim the deduction in their tax return.

If you would like specific advice regarding the relevance of the changes to personal tax deductible contributions on your personal situation, please speak to Twomeys' Financial Advisor Michael Gay on 02 69 420 300.

SUPERANNUATION UPDATE

Tax Deduction for Employee Superannuation Contributions

From 1 July 2017 employees will be eligible to claim a tax deduction for contributions personally made to a superannuation fund. The total of all deductible contributions, including superannuation guarantee, salary sacrificed contributions and personal deductible contributions is capped at $25,000 per annum.

Low Income Superannuation Tax Offset

Eligible taxpayers who earn up to $37,000 a year will get a tax offset, equal to 15% of before tax (employer and salary sacrifice) superannuation contributions, up to $500. The offset will be paid directly to the superannuation fund.

Spouse rebate

A tax rebate of 18% is available to individuals who make an after tax contribution of up to $3,000 for the benefit of a low income earning spouse. From 1 July 2017 the income the receiving spouse can earn is increasing from $10,800 to $37,000 for full eligibility with the phase out limit increasing from $13,800 to $40,000

Superannuation Co-Contribution

A government co-contribution is available to individuals who make an after tax superannuation contribution of up to $1,000. The co-contribution of $0.50 for each dollar contributed up to $500 is available for individuals under 71 with income under $36,021. The level of co-contribution phases out up to an income of $51,021.

Superannuation contribution splitting

Spouses are able to split up to 85% of concessional contributions (superannuation guarantee and salary sacrifice contributions) to their spouse's superannuation fund. The receiving spouse must be under 65 and not retired.

Section 293

From 1 July 2017 individuals with adjusted taxable income of more than $250,000 will be liable for an additional 15% tax on concessional contributions made on their behalf. This income limit is being reduced from its current level of

$300,000.

MASSIVE CHANGES TO SUPERANNUATION COME INTO EFFECT ON 1 JULY 2017.

WHAT ACTION SHOULD YOU TAKE BEFORE 30 JUNE 2017? 

Reform

Current rule

to 30 June 2017

New rule

from 1 July 2017

Impacted clients

Strategies/Actions to talk to your Financial Advisor about

Concessional

Concessional

Concessional

Clients with salary

Salary sacrifice

contributions cap

contributions caps for

contributions cap

sacrifice arrangements

arrangements and

reduced

2016/17:

$25,000pa for everyone.

in place or who make

personal deductible

from 1 July 2017.

-If aged 48 years or younger on 30 June 2016,

$30,000.

 

personal deductible contributions that exceed

$25,000.

contribution levels.

Alternative investment structures and strategies.

 

-If aged 49 years or older

 

 

Insurance arrangements.

 

on 30 June 2016, $35,000.

 

 

 

Deductibility

Ability to claim a

Rules restricting clients'

All clients eligible to make personal

Salary sacrifice

of personal

deduction for personal

ability to claim a

  contributions

arrangements or

contributions.

contributions to super

deduction for personal

from 1 July 2017 onwards.

personal concessional

 

limited to the self-

contributions removed.

 

contributions (or both).

 

employed or those who

 

 

 

 

pass the 10% rule.

 

 

 

Reduction in

Income threshold for

Income threshold for

Clients with total income

Contribution strategies.

Division 293 tax threshold for very high income earners.

Division 293 tax is

$300,000. Additional 15% tax paid on concessional contributions if exceed threshold.

Division 293 tax reduced to $250,000.

for surcharge purposes plus low tax contributions that exceeds $250,000.

Impact of Division 293 on assessable income if realising capital gains, receiving payments

on termination of

 

 

 

 

employment or taking

 

 

 

 

superannuation lump

 

 

 

 

sums before age 60.

Introduction of

No cap.

Transfer balance cap of

Clients with existing

Total value of retirement

transfer balance

 

$1.6m applies to restrict

retirement phase income

phase income stream, and

cap of $1.6m

 

amount of benefits

streams with total value

if applicable, strategies to

(2017–18)

 

that can be used to pay

of $1.6m or more on

reduce to less than $1.6m

 

 

retirement phase income

30 June 2017. Clients

by 30 June 2017.

 

 

streams.

commencing retirement

 

 

 

 

phase income streams on

 

 

 

 

or after 1 July 2017.

 

Transitional

Not applicable.

Transitional CGT relief

Clients receiving an

Movement of assets back

Capital Gains Tax

 

available where trustee(s)

existing TTR income

to accumulation phase

(CGT) relief

 

of super fund are

stream.

as a result of changes

 

 

required to move assets to accumulation phase due to introduction of transfer balance cap or removal of earnings tax exemption for Transition

Clients with existing retirement phase income streams with total value of $1.6m or more on 30 June 2017.

to the taxation of TTR income streams or the introduction of transfer balance cap rules for existing retirement phase income streams with a

 

 

to Retirement (TTR)

 

total value of $1.6m or

 

 

income streams.

 

more.

Taxation of

Not taxed.

Income and realised

Clients receiving an

Appropriateness of

assets supporting

 

capital gains on assets

existing TTR income

existing or new TTR

Transition to

 

supporting TTR income

stream.

income streams.

Retirement (TTR) income streams

 

streams assessable to super fund.

Clients qualifying to commence a TTR income

Conversion of existing TTR to account based pension.

 

 

 

stream.

 

Introduction of

No cap.

NCC cap reduced to nil

Clients who will have a

NCC before 30 June 2017

Non Concessional Contributions (NCC) Cap where

 

where total super balance equals or exceeds $1.6m as at 30 June in previous

total superannuation balance of $1.6m or more on 30 June 2017.

Spouse contribution and re-contribution strategies.

total super

 

financial year

 

 

balance exceeds

 

 

 

 

$1.6m

 

 

 

 

Annual NCC Cap

Annual NCC Cap of

NCC Cap reduced to

Clients wanting to make

NCC before 30 June 2017.

of $100,000 or 3-year $300,000

$180,000 or 3-year

$540,000 under bring

$100,000 per year or

3-year $300,000 under

NCCs of more than

$100,000 or $300,000

NCC after 1 July 2017.

under bring

forward rules.

bring forward rules

from 1 July 2017

 

forward rules

 

 

 

 

Remaining NCC

Annual NCC Cap of

NCC reduced to $460,000

Clients who triggered

NCC before 30 June 2017.

cap reassessed where triggered

$180,000 or 3-year

$540,000 under bring

if triggered bring forward cap in 2015/16.

bring forward cap in either 2015/16 or

NCC after 1 July 2017.

bring forward rules prior to 1 July 2017 but had not fully utilised

forward rules.

NCC reduced to $380,000 if triggered bring forward cap in 2016/17.

2016/17.

 

$540,000 cap.

 

 

 

 

Limit on

No limit.

Only able to bring-

Clients with super

NCC before 30 June 2017.

bring-forward contribution if super balance

 

forward the number of years of contributions that takes super balance

balances that will exceed

$1.6m if propose NCC made.

Spouse contribution and re-contribution strategies.

exceeds $1.6m

 

to $1.6m.

 

 

Spouse

Offset available for

Offset available for

Clients with a spouse who

Spouse contribution.

contribution

spouse contributions if

spouse contributions if

earns less than $40,000 in

 

offset

spouse earns less than

spouse earns less than

2017–18 or later years.

 

 

$13,800.

$40,000.