Reduction of Concessional Contributions Cap to $25,000 p.a.
Currently, individuals can make concessional (pre-tax) contributions up to $30,000 for those aged under 49 at 30 June of the previous financial year and $35,000 otherwise.
From 1 July 2017, the Government will lower the annual concessional contributions cap to $25,000 for all individuals aged under 75. The cap will be indexed in $2,500 increments (instead of the current $5,000 increase) in line with wages growth.
Allowing Personal Concessional Contributions Regardless of Employment Situations
Currently, individual are only allowed to claim a tax deduction in the personal tax return for personal contributions if they meet the 10% rule (i.e. employment income divided by your assessable income is less than 10%).
From 1 July 2017, all individuals aged under 75 are allowed to make concessional superannuation contributions up to the concessional cap (including those aged 65 to 74 who meet the work test) regardless of their employment situations.
This change will benefit individuals who are partly self-employed and partly salary earners, and individuals whose employers do not offer salary sacrifice.
Reduction of Division 293 Income Threshold from $300,000 to $250,000
Currently individuals with income and concessional super contributions in excess of $300,000 are required to pay 30% tax on their concessional superannuation contributions - commonly referred to as the Division 293 threshold.
From 1 July 2017, the government will reduce the income threshold, above which individuals will be required to pay an additional 15% tax on their concessional contributions, from $300,000 to $250,000 per annum.
The additional tax is imposed on the whole amount of the contributions, up to the concessional contributions cap, if your salary and wages are above the threshold. Otherwise, the additional tax is only imposed on the portion of the contribution that takes you over the threshold.
The intent of this change is to better target tax concessions to ensure the superannuation system is equitable and sustainable.
Introduction of the Low Income Superannuation Tax Offset (LISTO)
The government will introduce a Low Income Superannuation Tax Offset (LISTO), which will replace the Low Income Superannuation Contribution (LISC) policy that has been repealed from 1 July 2017.
From 1 July 2017, eligible individuals with an adjusted taxable income up to $37,000 will receive a LISTO contribution equal to 15% of their total concessional (pre-tax) super contributions for an income year, capped at $500.
The Australian Taxation Office will determine a person’s eligibility for the Low Income Superannuation Tax Offset and this will be paid into the person’s superannuation account.
Allowing Catch‑up Concessional Contributions over Five Years
From 1 July 2018, individuals will be able to make 'carry-forward' concessional super contributions if they have a total superannuation balance of less than $500,000 at 30 June of the previous financial year. Individuals aged 65 to 74 also need to meet the work test in order to access these arrangements.
Eligible individuals will be able to access their unused concessional contributions cap space on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire.
Only unused amounts accrued from 1 July 2018 can be carried forward. This means the first year in which you can access unused concessional contributions is the 2019-20 financial year.
This increased flexibility will make it easier for people with varying capacity to save and for those with interrupted work patterns, to save for retirement and benefit from the tax concessions to the same extent as those with regular income.