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Super Reform Bill: Breakdown of the key measures

You may have heard in the past couple of days, the senate has passed the key Bill (announced at the last federal budget) which will affect the popularly discussed Super Reforms.

Expand each of the key measures below to see the breakdown?

There will be a $1.6 million transfer balance cap on the total amount of accumulated superannuation an individual can transfer into the tax–free retirement phase

Breakdown:

From the 1st July 2017 the maximum amount of money each member in a SMSF can have in pension mode is 1.6 Million dollars, and balances above this will continue to be taxed at the 15% tax rate. For a couple the total balance is $3.2 million, but a maximum of $1.6m each


Reducing the concessional contributions cap to $25,000 for all taxpayers.

Breakdown:

From the 1st July 2017 the maximum amount to go into super as a tax deduction will be $25,000 down from the current $35,000 (for those aged under 49) and $30,000 amounts for all members regardless of age.


Introducing a concessional contributions catch-up regime for those with total super balances of less than $500,000 from 1 July 2018.

Breakdown:

Sheila has a super balance of $200,000 but did not make any concessional superannuation contributions in 2018–19 as she took time off work to care for her child. In 2019–20 she has the ability to contribute $50,000 in concessional (before-tax) contributions into superannuation ($25,000 under the annual concessional cap and $25,000 from her unused 2018–19 concessional cap which she can carry forward).


Allowing a deduction for personal contributions without testing the proportion of employment income received (the 10% test).

Breakdown:

Currently if you receive salary and wages income of more than 10% of your total taxable income the only way to contribute tax deductible contributions to super is through salary sacrifice arrangements with your employer, going forward from 1st July 2017 personal contributions will also be tax deductible up to the $25,000 limit.


Reducing the non-concessional contribution cap to $100,000 pa (or $300,000 under the bring forward provisions), limiting the ability to make NCCs to people who have a total superannuation balance of less than $1.6 million and introducing transitional rules for those who triggered the bring forward rule prior to 1 July 2017.

Breakdown:

These caps are reducing from the current $180,000 per year and bring forward of $540,000, currently there is no limit on non-concessional contributions, subject to caps and age, going forward once you have a balance of $1.6 million you will no longer be able to make non-concessional contributions to your fund.


Introducing a low income superannuation tax offset to replace the low income superannuation contribution (which will be abolished from 1 July 2017).

Breakdown:

For members of SMSFs who are on low incomes they will receive a rebate from the government to make sure there super contributions are not taxed at a higher rather than their personal earnings.


Increasing the annual income threshold from $10,800 to $37,000 for eligibility for the spouse contribution tax offset.

Breakdown:

If you are supporting your spouse and make a contribution on her behalf and her income is below the threshold going forward of $37,000 you are eligible for a tax offset in your personal income tax return.


Removing tax exempt earnings for transition to retirement income streams.

Breakdown:

Previously you could convert your fund into a Transition to retirement environment and the super fund earnings would be tax free, going forward from 1st July these will be taxed at 15%.


Lowering the income threshold for Division 293 tax to $250,000.

Breakdown:

If your personal taxable income is over $250,000 from July 1 2017 (previously $300,000) your superannuation contributions will be taxed at 30% rather than 15%.

Dale Trickett

Dale specialises in business advisory and compliance services for the medical industry and can provide advice in regards to appropriate structures, effective tax strategies and general business advice.