1st July has come and gone and with its passing, the new superannuation regime has officially begun. For those with pension balances above $1.6 million you should have been contacted by your super fund and/or accountant and made an election and signed documentation to commute your pension balance above $1.6 million.
However this is just the start of the impact of these changes – there is still a lot that needs to be considered and many strategies potentially available.
(1) New concessional contributions cap of $25,000 – for those who salary sacrifice into super, it is essential they get their arrangements reviewed to ensure that this new reduced cap is not exceeded and excess contributions issues are not caused.
(2) Non concessional contributions cap – for those with balances above $1.6 million, personal contributions can no longer be made into super. For those under $1.6 million, the amount of contributions possible will be dependent on your member balance as at 30 June 2017. To avoid breaching your non concessional caps, you will need to get guidance of your member balances on a timely manner. In addition, there are many strategies such as contribution splitting which now could be crucial in enabling you to maximise your superannuation balances.
(3) Estate planning – the new $1.6 million cap also makes reversionary pensions and estate planning a much trickier proposition and the right advice here could potentially save thousands of dollars in taxes. Getting the right advice and having the correct documentation and legal authorities in place has never been more important.
(4) Removal of restrictions in contributing deductible contributions into super – wage earning taxpayers now have much more flexibility in being able to contribute into super deductible personal contributions. For taxpayers with capital gains tax (CGT) events, these new rules could prove incredibly valuable to help minimise their tax liability.
(5) CGT relief – with the introduction of the new $1.6 million cap, there is CGT relief that can be taken to revalue the cost base of assets impacted to their market value. This election needs to be made in the 2017 super fund return and is irrevocable. Although this sounds straightforward there are many twists in this relief and care needs to be taken to ensure the right choices are made. In many cases those that apply the CGT relief without careful analysis of the situation may actually end up increasing the tax burden of the fund.
There has never been a time when getting the right advice from the right accountant can save you thousands of dollars. Elysium has the experience, knowledge and strategies and would welcome the opportunity to discuss your super fund needs.
Please note that this is general advice based on the taxation laws and should not be taken as personalized advice. Elysium has a separate advice arm which holds a limited licence which enables it to give personalised superannuation advice and we strongly recommend people should seek such advice for their superannuation needs.