What you need to know about the new super rules

Biggest reforms in over a decade

The biggest super reforms in over a decade commenced from 1 July 2017. Although many of the reforms have restricted super contributions, there have been some positive developments.

Here are four changes designed to assist individuals in growing their nest egg:

Flexibility for personal super contributions

Before 1 July 2017, an individual (mainly self-employed) could only claim a personal super contribution deduction if less than 10 per cent of their income came from salary and wages. As of 1 July 2017, this condition has been removed to improve the flexibility of the super system, benefitting the self-employed and those people who cannot salary sacrifice with their employer.

Most people under 75 years old will be able to claim a tax deduction for personal super contributions, including those aged 65 to 74 who meet the work test. If you want to claim a deduction for personal super contributions you must notify your fund in writing of the amount you intend to claim within the required timeframe and your fund must acknowledge your notice of intent to claim a deduction in writing.

Those making personal super contributions must keep in mind that these are considered concessional contributions; any contributions exceeding the $25,000 cap will be subject to an individual’s marginal tax rate.

Contributing downsizing proceeds to super

This year’s Federal Budget proposed that from 1 July 2018 individuals aged 65 or over will be able to make a non-concessional contribution to super of up to $300,000 from the proceeds of selling their home. These contributions will not count towards the non-­concessional cap and the individual making the contribution will not need to meet the existing maximum age, work or $1.6m balance tests for contributing to super.

Catch-up contributions

From 2018-19, individuals can carry forward and use in a later year, up to five years of unused concessional contributions cap. The first year in which you can use the carry­ forward for any unused amounts is 2019-20. To be eligible, your total superannuation balance must be under $500,000 at the end of 30 June of the previous financial year.

For those with total superannuation balances less than the transfer balance cap, they are eligible for a non-concessional contributions cap ($100,000 in 2017-18). Based on your total superannuation balance, you may be entitled to a two- or three-year bring-forward period for your non-concessional contributions cap.

Broadening of the spouse tax offset

Under the new super rules, the spouse income threshold has increased to $37,000 for the maximum tax offset of $540 as of 1 July 2017. Previously, members could claim a tax offset for contributions made to their spouse’s eligible fund if the total of the spouse’s assessable income, total reportable fringe benefits, and reportable employer super contributions was under $13,800.

The current 18 per cent tax offset of up to $540 will remain as is and will be available for any member, whether married or de-facto, contributing to a recipient spouse whose income is up to $37,000. The offset is gradually reduced for income above this level and completely phases out at income above $40,000.