We have had some pretty major changes to the superannuation legislation in this last round. As always, the devil is in the detail and there is a great deal to consider. The summary below gives you an idea of the broad changes that are coming through.

1. Pre-tax super contributions

 The pre-tax superannuation annual contributions (also known as concessional contributions) cap will be reduced to $25,000 from 1 July 2017.  If your client was 49 years of age or older on 30 June 2016, they may contribute up to $35,000 of pre-tax contributions by 30 June 2017, otherwise (if younger) their limit is $30,000.

How does this affect me?

If you can, consider increasing your before-tax contributions to the maximum amount of $30,000 or $35,000. You can do this either by making personal contributions and claiming a tax deduction if you’re eligible, or by entering into a salary sacrifice arrangement so your employer increases contributions to your super fund directly.

2. After-tax super contributions

The annual cap on after-tax super contributions will reduce by $80,000. Currently, if you’re under age 65, you can make $180,000 of after-tax contributions into super each year – this will reduce to $100,000.

How does this affect me?

You have a short time before this change limits your contribution capacity. If you’re under 65, you may be able to use the ‘bring forward’ rule. This involves contributing up to three times the annual after-tax super contribution limit by bringing forward two future years’ of your after-tax contribution entitlement – so three times $180,000, or $540,000 in total, can still be contributed.

However, if you don’t act, the maximum you’ll be able to contribute on a ‘bring forward’ basis will be $300,000. That’s a difference of $240,000 to your super balance. In addition, if you have more than $1.4 million in super at 30 June 2017, your after-tax contribution capacity will be further reduced. And if you have more than $1.6 million invested in super at that time, you won’t be able to make any after-tax contributions.

Put simply, not acting before 1 July could mean you’ve lost the opportunity to increase your super savings by as much as $540,000.

3. The $1.6 million pension cap

The maximum you can transfer into a tax free pension will be limited to $1.6 million. If you currently have a tax free pension, it may be in your best interest that the value of that pension at 30 June 2017 doesn’t exceed $1.6 million. This is called the ‘transfer balance cap’.

How does this affect me?

If you exceed the $1.6 million pension cap, the excess funds will need to be transferred back into a super accumulation account or taken out of super completely. The calculated earnings on these excess funds may be taxed.

The good news is that capital gains tax (CGT) relief may be available when transferring part of your tax free pension back to a super accumulation account.

4. Transition to retirement (TTR) pensions

From 1 July 2016, transition to retirement pensions (TTRs), will no longer receive the earnings tax exemption for assets supporting the pension. Effectively, they will be taxed in a similar way as accumulation accounts.

In addition, it is proposed individuals with term allocated pension (TAPs) be allowed to withdraw amounts from these products to help them comply with the introduction of the transfer balance cap.

From 1 July 2017, the investment earnings of TTR pensions will no longer be exempt from tax. 

How does this affect me?

Decide if it’s in your best interest to continue with your transition to retirement pension. If not, consider transferring it back into an accumulation account.

There’s good news here too – CGT relief may be available in relation to transition to retirement pensions.

5. Capital gains tax (CGT) relief

 Superannuation funds are able to reset the cost base of assets that are transferred from pension to accumulation phase to comply with the transfer balance cap requirements or because of the changes to the taxation of transition to retirement pensions.

To be eligible for the CGT relief, the asset must have been held in pension phase as of 9 November 2016 and continue to be held by the fund just prior to 1 July 2017. This time period is the ‘pre-commencement period’.

A CGT relief election has been introduced to alleviate the possible CGT consequences of the $1.6 million cap and taxation of TTR pensions. The CGT relief will help preserve the tax free status of capital gains accrued while supporting a pension.


The information is provided by Macquarie Bank Limited (MBL), is given in good faith and believed to be accurate and reliable as at 27 September 2016. The information does not take into account your investment objectives, financial situation or needs and should not be relied upon as advice. Any case studies and examples are illustrations only and any similarities to any readers’ circumstances are purely coincidental. No member of the Macquarie Group will be liable for any losses arising from reliance on this information. MBL does not give, nor purport to give, any taxation or superannuation advice. The application of taxation or superannuation laws to you depends on that your individual circumstances. You should seek independent professional advice on taxation and superannuation implications before making any decisions about a financial product or class of products.


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