From 1 July 2017, three major changes have come into effect in relation to concessional superannuation contributions.
1. Reduction in the Concessional Contribution Cap
From 1 July 2017, the general concessional contributions cap has reduced to $25,000 for all individuals regardless of age.
The previous and new caps are outlined in the following table:
The concessional contributions cap includes all concessional contributions made to your superannuation fund/s and comprises:
- Member concessional contributions; and
- Employer concessional contributions:
a) Superannuation Guarantee Amounts
b) Salary Sacrifice Amounts
2. Changes to Member Concessional Contribution Eligibility
From 1 July 2017, almost all individuals are able to make member concessional contributions and claim a deduction in their personal tax return for the 2018 and later income years. Prior to 1 July 2017, only those individuals whose salary income was less than 10% of their assessable income could claim a deduction for member concessional contributions (the 10% rule). The 10% rule has been abolished from 1 July 2017.
As such, concessional contributions in excess of SGC can be salary sacrificed or topped up with a member contribution.
Please ensure that you review both timing and value of existing salary sacrifice arrangements to ensure that they comply with the new concessional contribution caps.
A reminder that for individuals between 65 and 75 years of age, the work test must be met each financial year prior to salary sacrifice or member concessional contributions being paid to your fund/s. The work test is satisfied if the member is gainfully employed for at least 40 hours in a 30-day period prior to making any contributions. The work test is not required for Superannuation Guarantee Amounts.
3. Changes to the Division 293 income threshold
From 1 July 2017, the Division 293 income threshold has reduced from $300,000 to $250,000.
Individuals with income for surcharge purposes (broadly taxable income plus reportable fringe benefits plus investment losses) and low tax superannuation contributions greater than $250,000 in the 2018 financial year will receive an additional Division 293 tax assessment.
The assessment is calculated as an additional 15% tax on the lower of the excess over $250,000 or the value of concessional contributions.