As the new legislative changes to superannuation are rolled out, national law firm Gadens has flagged what key areas professionals will need to act on, with time already “running out” on certain items.
While there was major regulatory and legislative change across the board in superannuation during 2016, there are some key areas of focus that practitioners should be homing in on, according to partner at Gadens, Kathleen Conroy.
Contributions, in particular, was a major area of reform. Professionals are largely well-versed with the changes, but Ms Conroy noted some specific points professionals should keep in mind.
She said contributions must be received by the fund before 1 July 2017 to count as contributions for the 2016-17 year, including:
• Changes to the law on contributions may mean that clients need to change their salary sacrificing arrangements;
• Transitional arrangements will apply if someone has utilised the bring-forward rule and the three-year period applicable to them for this bring forward continues past 30 June 2016;
• Clients will not be able to rely on the catch-up contribution regime indefinitely. If they have not used any unused concessional contributions after a period of five years, the ability to carry those contributions forward is lost; and
• Time is running out if clients need to tip money into their fund to meet contractual obligations, including, for example, under any limited recourse borrowing arrangement.
The $1.6 million cap is also an ongoing area of confusion and frustration. Ms Conroy emphasised this is an area in need of serious attention.
“For the 2017-18 financial year, $1.6 million is the maximum amount that can be transferred into the retirement phase of superannuation i.e. that phase where you do not pay tax on the earnings. This amount will be indexed annually,” she said.
“Balances in excess of the cap will need to be removed to an accumulation account or out of superannuation savings and will attract an excess transfer balance tax. If you do not pay the excess transfer balance by the due date for payment, you will be liable to pay interest on that amount, calculated by reference to each day that the amount, and any interest, remains unpaid.
“Transitional arrangements apply to those who breach the cap by less than $100,000 as at 1 July 2017, but if in this category, you will have a maximum of six months from 1 July 2017 to bring the transfer balance in the retirement phase of your superannuation to the relevant figure or less.”
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