Superannuation Changes
Non-Concessional Contributions Cap
As most of you know, on 3rd May 2016, the treasurer announced a lifetime non-concessional contributions (NCC) cap of $500,000 which messed up countless retirement plans. In a welcomed backflip due to parliamentary opposition, this proposal has been scrapped. In place is a reduction in the annual NCC cap to $100,000 from 1st July 2017 (subject to legislation).
This means the NCC cap for this current financial year remains at $180,000, and there is no need to try to calculate how much you have contributed from 2007. If you are under 65, the 3 year bring forward rule is still available.
It isn’t all good news though, because from 1 July 2017, individuals with a balance in superannuation of more than $1.6 million at 30 June of the previous financial year will no longer be eligible to make non-concessional contributions. An individual will also not be able to make NCC that mean their balance would exceed the $1.6 million threshold.
Transfer Balance Cap of $1.6 million
Effective from 1st July 2017, the $1.6 million cap on superannuation in pension phase accounts will commence. This applies to both current retirees and individuals yet to retire, and applies to each individual. Individuals with pension balances of more than $1.6 million will need to take action to avoid penalty tax on any earnings on the excess. There are two choices:
- You can transfer the excess above $1.6 million into an accumulation account within your existing super fund; or
- You can withdraw the excess above $1.6 million out of the super system.
This measure has yet to be legislated, but it is likely that it will become law.
Work Test to Remain in Place
The Coalition intended to remove the over-65 work test (must work 40 hours in 30 days in order to contribute to super) but have decided to retain it.
Transition to Retirement Pensions
The Coalition still intends to remove the tax exempt status of earnings supporting a transition to retirement pension, subject to legislation. This means that earnings in the pension fund will be subject to 15% tax.
Removal of 10% test for Concessional Contributions
In order for an individual to claim a tax deduction for a concessional contribution to their super fund, they must be self-employed or have earned less than 10% of their income from an employer. This requirement will be removed from 1 July 2017, allowing all individuals under 75 to claim tax deductions for personal super contributions.
In the absence of legislation to give effect to all these measures, we recommend you seek advice before acting. If you have any questions on how these proposed changes will impact you or what opportunities they may create, please contact our office.
Spring clean your finances
Spring is a great time of year to review your finances. Whether it be checking your mortgage provider is offering a competitive rate, reducing your household costs or just time to rethink about consolidating those multiple superannuation accounts.
Here at Veritas we can assist with superannuation reviews and understanding your insurance needs. Remember switching super may also close valuable insurance cover so it is always best to understand the full consequences before rolling your benefits into another fund.
Do your kids need help with budgeting? Or help in setting goals? Don’t forget we also have gift vouchers available that can be useful presents for your children. We can help them on the path to financial success with our financial coaching and planning expertise.
Handy resources:
https://www.moneysmart.gov.au/tools-and-resources/news/spring-clean-your-finances
New Tax Tables from 1 October 2016
As announced in the 2016 Budget, there was a change to the personal income tax rates, increasing the 32.5% tax threshold from $80,000 to $87,000. This change applied from 1 July 2016.
Employers need to take note as this means new tax tables and payroll software updates will apply from 1 October 2016. The updated tax tables can be downloaded from www.ato.gov.au/taxtables or contact your payroll software provider for the relevant updates.
Beware scammers and be safe online
We have had quite a few clients call up about scammers doing the rounds pretending to be from the ATO so we thought it was a great time to provide resources to help you if you receive an unexpected call requesting personal information.
www.scamwatch.gov.au provides up to date information about current (and old) scams occurring in the community.
Never divulge any personal information to someone who calls you or knocks on your door. If in doubt hang up and contact the organisation they propose to be from directly or check their website to see if they are aware of any scams.
www.staysmartonline.gov.au provides great resources on how to keep your personal and financial information safe when using the internet.
Some basics on how to protect yourself online
- If you are unsure about the sender, delete the message—don’t reply or try to unsubscribe to the email or SMS as it will confirm your address and you may receive more spam.
- Never send your personal, credit card or online account details out in an email.
- Don’t access banking and other online accounts from an email link—use a bookmarked link or type the address into your browser.
- Always check the website address carefully, scammers often set up fake websites with very similar addresses.
- Always read the terms and conditions carefully, ‘free offers’ often have hidden costs.
- Check the business name at www.asic.gov.au (Australian businesses only). You can also search for the business name or scheme through a search engine.
- Install software that protects your computer from viruses and unwanted programs and keep it up-to-date.
Like to know more? Use the search terms “stay safe online”. This will provide additional resources for you to read.
Important changes to the Centrelink Age Pension in 2017
From 1 January 2017, there are some important age pension changes that could impact your benefits and warrant some pre-emptive action.
What’s changing?
The lower asset threshold that determines your eligibility for the full age pension will increase. This threshold varies, depending on your relationship status and whether or not you own a home. It’s also indexed periodically by the Government. To find the current thresholds visit www.humanservices.gov.au.
In addition, the age pension payable will be reduced by $3, for every $1,000 you hold in assets above this threshold. The current reduction amount, known as the ‘taper rate’, is $1.50 per $1,000. This will lower the asset test upper threshold after which no pension is payable.
How will these changes impact your entitlements?
Your age pension entitlements are assessed under both an income and assets test. The impact of these assets test changes on your entitlement to age pension will depend on a range of factors.
If we look at the current and new asset test thresholds for a homeowner couple for example, the lower threshold will increase from $296,500 to $375,000 on 1 January 2017. This means more people will be eligible to receive a full pension under the asset test assessment. However, the income test may override the asset test (depending on the type of assets and income) and reduce their pension payment.
In contrast, the asset test upper threshold after which no pension is payable will reduce from $1,175,000 to $818,000* for a homeowner couple on 1 January 2017, resulting in many pensioners losing entitlement to pension altogether.
What to do next?
The thresholds in the above example apply exclusively to home-owning couples and the dollar values would be different if you are single and/or not a home-owner. The best way to determine how you may be affected is to make an appointment with your adviser to review your financial position and determine if any strategies can be implemented to improve your entitlement to the pension going forward. The earlier you do this, the more you may be able to take advantage of any suitable strategies.
To find out how the changes could impact you and discuss strategies that may assist you, contact our office to make an appointment with one of our advisers.
* Actual cut-out thresholds are dependent upon the rate of pension payable and therefore the cut-out thresholds that will apply at 1 January 2017 are not yet known. We have assumed some indexation of the current maximum rate of age pension.
Asset Test comparison
| Family Situation | Current | 1 January 2017 | ||
| Lower Threshold | Upper Threshold | Lower Threshold | Upper Threshold | |
| Homeowner | ||||
| Single | $209,000 | $793,750 | $250,000 | $543,780 |
| Couple | $296,500 | $1,178,500 | $375,000 | $817,870 |
| Non-Homeowner | ||||
| Single | $360,500 | $945,250 | $450,000 | $743,780 |
| Couple | $448,000 | $1,330,000 | $575,000 | $1,017,870 |
Information for current threshold valid for 20th September to 31 December 2016
Staff Updates
As most of you know, Ken has returned from his extended leave and is back on deck and hard at work. If you have any queries, please don’t hesitate to contact him.
It is with great pleasure that we advise that on 12th August 2016, Jessica Jalkanen gave birth to a very healthy baby boy, weighing in at 4.19kgs (just under 9 pound 3). Jaxon Thomas Brown and Jess are both home and doing very well.
