2017 Federal Budget Changes

May 09 2021

On 23 November 2016, the Federal Parliament passed legislation relating to a number of superannuation reforms proposed in the 2016 Federal Budget. The following changes have been legislated to commence on 1 July 2017.

Change Impact of the change
Concessional Contributions

Concessional contributions cap will reduce to $25,000 per annum for all ages from 1 July 2017. (Accumulation Plan, Active Lump Sum Defined Benefit, Deferred/ Preserved Lump Sum Defined Benefit, Defined Benefit Active Pension, Benefit Deferred Pension, Working Income Stream & Temporary Disability Pension.

  • The concessional contributions cap of $30,000 per annum ($35,000 for over 50’s) will be reduced to $25,000.

The Division 293 tax threshold for high income earners, above which concessional contributions are taxed at 30%, has been extended to income earners of $250,000 and above (currently $300,000).

  • From 1 July 2017, all concessional contributions in excess of this threshold will be taxed at 30%, rather than 15%.
Non-concessional Contributions

Non-concessional contributions cap will reduce from $180,000 p.a. to $100,000 p.a. for members under age 75. (Accumulation Plan, Active Lump Sum Defined Benefit, Deferred/ Preserved Lump Sum Defined Benefit, Defined Benefit Active Pension, Benefit Deferred Pension, Working Income Stream & Temporary Disability Pension.

  • Members will only be able to contribute a maximum non-concessional contribution of $100,000 per annum from 1 July 2017
  • Members under 65 can bring forward $300,000 of non-concessional contributions (previously $540,000); and
  • Members with $1.6 million or more in their super accounts will have a non-concessional cap of zero ($0). Any non-concessional contributions made by a member with a total superannuation balance of $1.6 million or more will be taxed at marginal rates.
Transfer Balance Cap

Introduction of a transfer balance cap of $1.6 million on retirement balances from 1 July 2017. (All Funds)

  • A lifetime transfer balance cap will apply to current holders of superannuation income stream balances in the retirement phase. The cap will also apply to all members from 1 July 2017 at the point they  transfer their superannuation balance ( or part thereof) to a retirement income stream in the retirement phase.
  • The retirement phase is when you have reached a nil condition or release such as retirement after preservation age, age 65, terminal medical condition or total and permanent disablement.
    The transfer balance cap of $1.6 million will be the maximum amount of accumulated superannuation that can be transferred into a retirement income stream during a member’s lifetime.
  • The transfer balance cap will be indexed in line with the CPI in increments of $100,000.
  • Current income stream account holders with more than $1.6 million in a superannuation retirement income stream(s) in the retirement phase (i.e. ESSSuper Income Stream), will be required to withdraw the amount in excess of the transfer balance cap or transfer this amount back to the accumulation phase.

 Any amount in a retirement income stream in the retirement phase in excess of $1.6 not withdrawn or transferred back to the accumulation phase will incur transfer balance tax. This amount will be determined by the ATO and is 15% of the notional earnings amount calculated by the ATO until such time as the amount is withdrawn. The transfer balance tax will increase to 30% from 1 July 2018 for members that have previously incurred the transfer balance tax. Defined benefit lifetime pension incomes are now included in the assessment of the transfer balance cap of $1.6 million. Defined benefit lifetime pensions will be valued at a rate of 16 times the individual’s annual pension amount at 1 July 2017, irrespective of pensioner age.

Lifetime Pensions

Lifetime Defined Benefit (DB) pension scheme recipients over the age of 60, who receive pension payments in excess of $100,000 per year, will have 50% of the pension payments in excess of $100,000 become assessable for income tax. (All Defined Benefit Pensions)

An example: a member with a DB lifetime pension of $150,000 per year will have $25,000 (which is 50% of the income in excess of $100,000) become assessable for income 

Low Income Super Contribution

Extension of the Low Income Super contribution (LISC), but renaming it the Low Income Superannuation Tax Offset. (Accumulation Plan, Beneficiary Account, Active Lump Sum Defined Benefit, Deferred/ preserved Lump Sum Defined Benefit, Defined Benefit Active Pension, Defined Benefit Deferred Pension & Working Income Stream)

  • LISC will be renamed the Low Income Superannuation Tax Offset (LISTO) and will continue indefinitely from 1 July 2017.

Individuals with an adjusted taxable income of $37,000 (or less) will be entitled to a refund of the 15% contributions tax paid on concessional contributions up to a limit of $500.

Spouse Tax Offset

Increase in the income threshold for spouse tax offset from $10,800 to $37,000 and phases out at $40,000. (Accumulation Plan)

  • The income threshold for the spouse tax offset where the spouse is a low income earner will increase.

A contributing spouse will be able to claim an 18% tax offset against contributions made to an eligible spouse’s superannuation account up to a maximum offset of $540 ($3000 contribution).

Removal of anti-detriment provisions

Removal of anti-detriment provisions on superannuation death benefits. (Accumulation Plan, Beneficiary Account, Working Income Stream & Retirement Income Stream)

From 1 July 2017, the anti-detriment provision allowing superannuation funds to claim a tax deduction for a portion of the death benefits paid to eligible dependents has been removed.

Removal of tax exemption for fund earning

Removal of tax exemption for fund earnings on transition to retirement pensions (ESSSuper Working Income Stream) 
From 1 July 2017, the fund will pay 15% tax on investment earnings.

Pension Payments

Removal of the option to treat a pension payment from a super fund as a lump sum withdrawal for tax purposes for transition to retirement pensions (ESSSuper Working Income Stream) (Working Income Stream).

Members under age 60 who commute part of their ESSSuper Income Stream into a lump sum will be assessable for income tax and will no longer be able to claim the payment under the $195,000 tax free threshold applicable to lump sums.