Superannuation changes 1 July 2017
Super is evolving, are you ready?
There are changes coming to super on 1 July 2017 that will
affect super contributions and the way super and retirement income
is taxed. Here we explain how the changes will affect you, whether
you are contributing to super, about to retire or already
Who will the 2017 super changes
If you earn less than $40,000 or are self-employed you will
benefit from more flexible super contribution rules. If you are a
high income earner or have a large super balance there are new
contribution limits and a balance cap that will change how much you
can add to your super.
Low income earners (people earning
less than $40,000)
If you are a low income earner, work part time or don't have
constant income, it can be hard to save for retirement. Changes to
super tax offsets and more flexible super contribution arrangements
will make it easier to add more to your super.
Spouse super contributions
If your spouse earns less than $13,800 pa and
you make a contribution to their super, you can claim a tax offset
equal to 18% of the contributions, up to $540.
From 1 July 2017 your spouse's income threshold will increase to
$37,000. Even if they earn up to $40,000, you could still be
entitled to a partial super tax offset. Other restrictions apply,
however this change will allow couples to get greater benefits from
adding to each other's super.
Case study: Emi boosts her super
Emi and Ken have two children who are still at school. Ken earns
$120,000 working full-time and Emi works part-time and earns
$30,000 a year. Emi had several years out of the workforce when
their children were young so her super balance is quite low.
Emi makes a non-concessional (after tax) contribution of $20 to
her super each week so that she can receive a government co-contribution of $500.
Because her income is low she will also receive a low income super
tax offset of $427 (15% of her employer contributions).
Ken would like to help Emi build her super. He
decides to contribute a further $100 a week in non-concessional
spouse contributions to her super fund. From 1 July 2017 Ken will
be able to claim a tax offset of up to $540 for the spouse
contributions he makes. So while he is helping grow Emi's super
he'll be reducing his tax bill by $540 a year.
Low income super tax offset (LISTO)
Eligible taxpayers that earn up to $37,000 a year get an
additional super contribution from the Government, equal to 15% of
before tax (employer and salary sacrifice) super contributions, up
to $500. This is called the low income super contribution
This is being replaced by the low income superannuation tax
offset (LISTO) but the rules will largely be the same.
Carry your super cap forward
A new 'carry forward' rule for before tax (concessional)
contributions is being introduced that can help you catch up on
before tax contributions later.
If you've had time out of the workforce, work part-time or have
irregular work patterns and have contributed less than your before
tax (concessional) cap, you can rollover the unused portion of your
concessional contribution cap for up to 5 years, allowing you to
make additional contributions in future years.
High income earners (people
earning more than $250,000)
Higher income earners could be affected by a reduction in both
before and after tax contribution limits, see changes to personal super contributions below.
If your combined income and super contributions exceed $300,000
you may have to pay extra tax on the excess, this is known as Division 293
tax. From July the
threshold for Division 293 tax will be reduce to $250,000, meaning
more higher income earners will have to pay extra tax.
People who want to make extra
Many of the 2017 super changes affect personal super
contributions, including tax deductions for contributions,
contribution caps and eligibility for the Government's co-contribution.
Tax deductions for personal super contributions
Self-employed people and those that earn less than 10% of their
income from salary or wages, can claim a tax deduction for any
contributions they make to super. The contributions are then
treated as 'before tax (concessional) contributions'.
From 1 July 2017, the 10% rule will be removed, making it easier
for more people to make use of their concessional contributions
Before tax super contributions (concessional)
On 1 July 2017, the concessional contributions cap will reduce
to $25,000 for everyone. This means the amount of contributions you
can make that are concessionally taxed will
However, you will be able to 'carry-forward' any unused
concessional contributions cap on a rolling 5 year basis. This
means carried forward amounts will expire after 5 years.
After tax super contributions (non-concessional)
The after tax contributions cap is reducing from $180,000 to
$100,000 per year. You will still be able to bring forward up to
three times the cap to make larger one-off contributions, if you
are under age 65 and have not reached the new transfer balance cap.
The full benefit you bring forward may not apply if your total
super balance is close to the balance transfer cap.
Work out whether to make extra contributions before or after
Government super co-contributions
Low income earners who make after tax contributions to super may
be eligible for a Government co-contribution payment into their
super. This is calculated at 50 cents for every dollar you
contribute (up to $500).
In addition to the current co-contribution eligibility
requirements, from 1 July 2017 you must also have a total
superannuation balance at the end of the previous financial year of
less than the transfer balance cap and not have exceeded your after
tax contributions cap.
For example, if you have made personal after tax contributions
and have satisfied the current co-contribution eligibility
requirements, but have already reached your transfer balance cap,
then from 1 July you will no longer be entitled to a Government
Retirees or those
The rules around retirement income streams are changing.
Transition to retirement (TTR) pensions will become less tax
effective and there will be a cap on how much you can transfer into
a tax-free super pension. There are also new restrictions on the
way death benefit payouts are calculated.
Transition to retirement (TTR) pensions
Under the current rules, earnings on transition-to-retirement (TTR) pensions
are not taxed. From 1 July 2017, the earnings of a TTR pension will
be taxed up to 15%, the same as they are in a super accumulation
For example, if you had a TTR pension of $200,000 and the
investment earnings were $10,000 for the year, there is currently
no tax on those earnings. From July the earnings will be taxed at
up to 15%, or up to $1,500 in this example, depending on the type
of underlying investments.
The earnings of ordinary retirement pensions will still be tax
Super transfer balance cap
If you are aged 60 or older, income payments from an account-based super pension are tax free.
From 1 July 2017, there will be a limit on how much super you can
transfer to a tax-free account-based pension. This is called the
'transfer balance cap' and it will initially be set at $1.6 million
but will be indexed by CPI, rounded down to the nearest
Only the unused portion of your cap will be indexed so once you
have reached the transfer balance cap you won't be entitled to
further indexation. You can have multiple transfers to pension
accounts as long as the total amount transferred into an
account-based pension is under the cap. Investment earnings will
not affect your transfer balance cap.
TTR pensions will not count towards your transfer balance cap
and there is no limit on how much you can have in your accumulation
Account-based pensions started before 1 July 2017 will be
counted towards the transfer balance cap on 1 July 2017. Pensions
started after this date will count towards the cap when they
If you exceed your transfer balance cap, you may have to remove
the excess funds and pay tax on the earnings related to the
Defined benefit pensions
Different tax rules will apply to defined benefit
pensions as you usually can't transfer or remove excess amounts
from these income streams. Speak to your defined benefit pension
fund to see how the changes will affect you.
Super anti-detriment payment
An anti-detriment payment is a payment to the dependent
beneficiaries of a deceased super fund member that represents a
refund of super contributions tax. A dependent beneficiary of a
deceased estate can request an anti-detriment payment be paid as
part of a super death benefit payout.
From 1 July 2017, this payment will no longer be available as
part of a super death benefit payment. Super funds can still make
anti-detriment payments until 30 June 2019 for members who died
before 1 July 2017.
The July 2017 super changes are designed
to make the system fairer and sustainable but it's now more
important than ever to start planning your retirement income early.
Visit the ATO's super changes webpage for more
detailed information and examples of how you might be
Last updated: 19 Jun 2017