•  
    Next Steps Plus

    Autumn 2017


    Next Steps Plus
    Autumn 2017
    Couple in parkOlder couple holding hands
  • Changes to the rules regarding super are coming
    Changes to the rules regarding super are coming

    From 1 July 2017, there will be a number of significant changes to the rules relating to superannuation. Some of these changes are complex and their impact will depend on individual circumstances.

    If you have any questions or concerns regarding the changes, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.

    Please note we’ve only listed changes that apply to VicSuper products and haven’t included information in relation to other type of funds, such as public sector funds, SMSFs or defined benefit pensions.

    The key changes are listed below, click on the link to see more detail on each change.
    From 1 July 2017, there will be a number of significant changes to the rules relating to superannuation. Some of these changes are complex and their impact will depend on individual circumstances.

    If you have any questions or concerns regarding the changes, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.

    Please note we’ve only listed changes that apply to VicSuper products and haven’t included information in relation to other type of funds, such as public sector funds, SMSFs or defined benefit pensions.

    The key changes are listed below, click on the link to see more detail on each change.

Change: $1.6 million cap on transfers of super into the tax-free retirement phase

When does this come into effect?
This change will come into effect 1 July 2017.

What does this mean?
There will be a transfer balance cap on the amount of superannuation savings that can be transferred into certain pension accounts, initially set at $1.6million. This will be indexed in line with the consumer price index in $100,000 increments. Members should be aware that additional tax will apply if the cap is exceeded.

It’s important to note, this cap applies to all pension accounts (except Transition To Retirement income streams) you may have.

The Government’s intention is to limit the amount of superannuation in retirement phase which receives the benefit of tax exempt investment earnings.

What could you do if this measure applies to you?
It may be best to check the balance in all of your pension accounts, as you may have more than one. If you will have more than $1.6million in your pension account or accounts on 30 June 2017, you’ll need to take some action.

If you do have an excess, you could rollover the excess back into an accumulation account, which will be subject to 15% tax on earnings or you could withdraw the excess from the super system (the best option will be dependent on your situation, so it’s best to seek advice).

Earnings on your pension balance after 1 July 2017 will not be counted towards the cap. 
If you are unsure how this change may affect you or to discuss your options, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.

Are there any exemptions?

The cap doesn’t apply to Transition To Retirement (TTR) pensions.
Some defined benefit pensions are still awaiting guidance from the Australian Taxation Office to determine the value of these accounts for this purpose. Therefore, if you have a defined benefit pension, you may not be able to determine your likely position now.


Government factsheet (PDF)

Change: Removal of investment earnings tax exemption from Transition to Retirement (TTR) income streams

When does this come into effect?
This change will come into effect on 1 July 2017.

What does this mean?
From 1 July 2017, all investment earnings on assets in TTR income streams (such as VicSuper Flexible Income with the TTR feature) will be taxed at 15%. Prior to this, all earnings were tax exempt. This change will apply irrespective of when the TTR income stream commenced.

What could you to do if this measure applies to you?
If you started a VicSuper Flexible Income with the Transition to Retirement feature and are under age 65 but have since retired but have not told us you retired, it is very important you complete a retirement declaration to ensure your investment earnings on your Flexible Income remain tax-free from 1 July 2017.

If you have a TTR income and you think this change will affect you, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.

Government factsheet (PDF)

Change: Changes to the annual cap for non-concessional (after-tax) contributions

When does this come into effect?
This change will come into effect on 1 July 2017.

What does this mean?
The non-concessional (after-tax) contribution cap will be reduced from $180,000 to $100,000 per year across all super accounts a member may have.

It’s important to note that members will have a non-concessional contribution cap of nil where their super balance on 30 June the previous year is equal to or exceeds the general transfer cap (initially $1.6 million). Therefore in this situation any non-concessional contributions made from 1 July 2017 will be excess non-concessional contributions.

If you’re under 65 and your total super balances are less than $1.6 million, you may be eligible to bring forward up to 3 years of non-concessional contributions. If your balance is between $1.4 million and $1.6 million, there is reduced eligibility for these provisions.

With the reduction of the non-concessional contribution cap, there is a decrease in the bring-forward provisions from $540,000 over 3 years to $300,000 over 3 years.

However, if you’ve triggered the bring forward rule within the last 3 years, you could still contribute up to the existing cap ($540,000) by 30 June 2017.

From 1 July 2017, there are transitional rules if you have triggered the bring forward rule prior to 1 July 2017 but did not fully utilise the cap by 30 June 2017, so it’s best to speak to a financial adviser for advice. 

What could you do if this measure applies to you?
It’s always worthwhile keeping an eye on what your contributions are. And as bring forward rules are complex, if you have any questions, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.

Government factsheet (PDF)

Change: Eligibility for the Government co-contribution scheme

When does this come into effect?
This change will come into effect on 1 July 2017.

What does this mean?
Members who make non-concessional contributions in excess of the non-concessional cap or have a total super balance on 30 June the previous year that is equal to or exceeds the general transfer cap (initially $1.6 million) will not be eligible for the Government co-contribution scheme.

What could you do if this measure applies to you?
If you may be eligible for the co-contribution for the 2017/18 financial year, ensure that you know your total super balances at 30 June 2017 and carefully review your contributions you make that year. If you have any questions, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.

Government factsheet (PDF)

Change: Definition of high income earners for additional tax on concessional contributions

When does this come into effect?
This change will come into effect on 1 July 2017.

What does this mean?
Individuals with an adjusted annual income of over $250,000 (reducing from $300,000 from 1 July 2017) generally have their before-tax contributions taxed at an effective rate of 30% (the additional 15% is payable by the individual as advised by the ATO).

What could you do if this measure applies to you?
It's advisable to be aware of your pre-tax contributions and how they may be taxed. If you are unsure, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.

Government factsheet (PDF)

Change: Reduction of the annual cap for concessional (pre-tax) contributions

When does this come into effect?
This change will come into effect on 1 July 2017.

What does this mean?

The concessional (pre-tax) contribution cap will be reduced to $25,000 per year across all super accounts a member may have. This cap will be indexed annually in line with wages growth in increments of $2,500.

Remember that the concessional contribution cap includes Super Guarantee (SG) contributions, salary sacrifice contributions and personal deductible contributions.

What could you do if this measure applies to you?
Prior to 1 July 2017, it may be possible to increase your pre-tax contributions for this financial year to take advantage of the existing annual caps of $30,000 for those aged under 50 and $35,000 for those aged 50 or over.

Please review your contributions and if you have any questions, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.

Government factsheet (PDF)

Change: Broadening of tax deductibility of personal super contributions

When does this change come into effect?
This change will come into effect on 1 July 2017.

What does this mean?
Subject to age and work status eligibility, all members will be able to claim an income tax deduction for personal super contributions made to complying super funds (like VicSuper).

This change will allow a tax deduction on contributions for those who are currently unable to claim a tax deduction for contributions. This is of interest for some members in self-employment not able under current rules to claim a tax deduction on contributions and members not currently able to access salary sacrifice at work. These amounts will count towards the concessional contribution cap ($25,000 per year across all super funds), and will generally be taxed at 15% (or 30% if you are a high income earner – see the change above).

If you are an employee and intend to claim deductions for personal contributions, you should take into account other concessional contributions you are already making e.g. Super Guarantee and salary sacrificing, to ensure you don’t exceed the concessional contribution cap.

What could you do if this measure applies to you?
If you believe you could benefit from this change or have any questions, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.

If you are new to claiming deductions for personal superannuation contributions, you should note that:
  • to obtain a tax deduction you must let VicSuper know that you intend to claim a deduction by completing the ‘Notice of intent to claim or vary a deduction for personal super contributions’ form, that we will send to you after 30 June, specifying the amount you intend to claim. 
  • VicSuper must receive this form back by the earlier of when you submit your tax return and the end of the financial year following the financial year in which the contribution was made. 
  • we will send you an acknowledgement letter, which you will need to claim your tax deduction. 
  • if you leave VicSuper, roll over to a VicSuper Flexible Income or make a partial withdrawal from your account, you must provide this form to VicSuper prior to the withdrawal to ensure you are still able to claim a tax deduction.
Government factsheet (PDF)

Change: Increase of spouse tax offset income threshold

When does this change come into effect?
This change will come into effect on 1 July 2017.

What does this mean?
Currently, if your spouse has made eligible spouse contributions into your account they may be eligible for a tax offset of up to $540 each financial year. Full eligibility for this offset depends on your adjusted income being less than $10,800 per year. The tax offset phases out completely when your adjusted income exceeds $13,800.

From 1 July 2017, while the maximum offset remains $540, the adjusted income threshold increases to $37,000 per year. As is currently the case, the offset is gradually reduced for incomes above this level and will not be available if you’re earning over $40,000.

There are no changes to the current age based rules, therefore the spouse receiving any contributions must be under 65 years old. A work test must be met if 65 or over but less than 70.

If you make non-concessional contributions in excess of the non-concessional cap or have a total super balance on 30 June the previous year that is equal to or exceeds the general transfer cap (initially $1.6 million) your spouse will not be eligible tax offset for spouse contributions.

What could you do if this measure applies to you?
If you have any questions, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.

Government factsheet (PDF)

Change: New Low Income Superannuation Tax Offset replacing Low Income Superannuation Contribution

When does this change come into effect?
This change will come into effect on 1 July 2017.

What does this mean?
The Low Income Superannuation Tax Offset (LISTO) will replace the current Low Income Superannuation Contribution (LISC). In effect, this is just a name change.

What could you do if this measure applies to you?
As this is in effect a name change, members cannot do anything at this time. As currently stands, members with an adjusted taxable income up to $37,000 will receive a refund of the tax paid on their concessional superannuation contributions, up to a maximum of $500.
 
Government factsheet (PDF)

Change: Removal of anti-detriment payments on death

When will this change come into effect?
This change will come into effect on 1 July 2017.

What does this mean?
Currently superannuation funds may pay an anti-detriment lump sum payment as part of a death benefit to eligible beneficiaries. The anti-detriment payment is effectively a refund of tax on concessional contributions.

These payments will only be available where death occurs before 1 July 2017, and the payment is made by 30 June 2019. Outside of these dates, anti-detriment payments will no longer be made.

What could you do if this measure applies to you?
If you have any questions, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.

Government factsheet (PDF)

Change: Removal of income stream/lump sum withdrawal election

When does this come into effect?
This change will come into effect on 1 July 2017.

What does this mean?
Members will no longer be allowed to elect certain superannuation income stream payments to be taxed as lump sums and be counted toward the minimum pension payment amount.

What could you do if this measure applies to you?
If you have any questions, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.

Government factsheet (PDF)

Change: Catch-up concessional contributions (effective 1 July 2018)

When does this come into effect?
This change will come into effect on 1 July 2018 but will not have practical effect until the 2019/20 financial year.

What does this mean?
If you have a total super balance of $500,000 or less at the end of a previous financial year, you’ll be able to top up your super through a new catch-up process for unused concessional cap amounts on a rolling 5 year basis. Any unused concessional contribution cap prior to 1 July 2018 cannot be counted. Therefore, for the 2019/20 financial year you can only count one year back and for the 2020/21 financial year you can only count two years back and so forth until five years can be counted back and then it becomes a rolling 5 years.

The first year this applies is 2019/20 and your total super balance must be $500,000 or less on 30 June 2019. If you did not use all of your concessional contribution cap in the 2018/19 year then the unused amount can be carried forward to 2019/20 and counted toward your concessional contribution cap for 2019/20.

What could you do if this measure applies to you?
It is advisable to monitor your concessional contributions for your eligibility. If you are unsure, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.

Government factsheet (PDF)

  • Get help
    Get help

    If you have any questions or concerns regarding the changes, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.
    If you have any questions or concerns regarding the changes, please contact our Member Centre on 1300 366 216 or online to book an appointment with one of our super experts. There’s no obligation, and in most cases, no charge either.