1. The biggest changes to super in 10 years
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April 2017

2. General advice
The information provided in this presentation has been prepared as general advice only and has been issued by Centrepoint Alliance Limited and <insert Licensee> (AFSL XXXXX). It is based on our understanding of current regulatory requirements and laws as at the date of publication. As these laws are subject to change you should talk to a professional financial adviser for the most up to date information.
We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice and seek the assistance of a financial adviser before acting on any advice contained in this presentation. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Centrepoint Alliance Ltd nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.

3. 2016 Budget reforms What’s out? What are the key changes?
What should I be doing now?
The 2016 Federal Budget introduced some of the most significant changes to super since the Costello Budget of You may recall that the 2006 Budget that introduced changes would take effect from 1 July 2007, and shaped the superannuation landscape that exists today. It saw
the removal of tax on superannuation lump sum and pension benefits for most people once they reached 60 years of age,
a change to the taxation components of superannuation benefits,
the introduction of the simpler account based pensions, that replaced allocated pensions,
the introduction of a limit on non-concessional contributions (then known as uneducated contributions), and
the removal of reasonable benefit limits.
Turning back to the 2016 Budget, most of the announced measures have now passed in to law. However, a couple of measures have been dropped and the commencement of another, deferred for a year.
Today we will look at what is now law and how the changes will affect individual Australians.
Even though the changes will not, in the main, take effect from 1 July 2017, there are some opportunities that need to be considered before the end of this financial year. We will explore those opportunities.

4. What’s out? Reforms not proceeding
Lifetime cap for non-concessional contributions
Removal of work test requirement for those aged
One of the more controversial measures announced in the Budget was the proposal to replace the limit on the amount of non-concessional contributions that could be made to superannuation. Non-concessional contributions are contributions made from ‘after-tax’ income, savings, the proceeds of the sale of investments and, in some cases, the proceeds of inheritances and windfalls. Non-concessional contributions are generally made as one-off larger contributions.
The Budget proposed that a lifetime limit be placed on non-concessional contributions of $500,000. What’s more, this limit would be back-dated to include all non-concessional contributions made since 1 July 2007.
The good news is, in September 2016 the government announced that they would not be proceeding with the imposing a lifetime limit of $500,000 on non-concessional contributions.
As a result of not proceeding with this reform, a number of other Budget measures were amended in order to generate the tax savings that would be lost as a result of discontinuing with the lifetime cap on non-concessional contributions.
Under present laws, anyone aged between 65 and 74 who would like to make contributions to a superannuation fund must meet a ‘work test’. That is, they must be employed or self-employed for at least 40 hours, worked within a period of 30 consecutive days, in the financial year in which they intend to contribute to super.
The Budget included a proposal to remove this work-test requirement. This was very welcomed news and would enable anybody, up to their 75th birthday, to make contributions to super, whether working or not.
Unfortunately this proposal has been abandoned and the work-test will remain in place for people wishing to contribute to super beyond age 65.
Another very positive measure, being the ability to carry forward the unused portion of the concessional contribution cap, has been deferred by 12 months however we will deal with that in a few minutes.
Lets now explore the changes that have been legislated….

5. Transfer balance cap Key elements: $1.6m cap Defined benefit pensions
Death benefit pensions
Capital gains tax relief.
One of the attractions of superannuation is the favourable tax treatment it enjoys.
Where a superannuation fund is in the ‘accumulation phase’ – that is, wealth is being accumulated for retirement – the investment earnings of the super fund are taxed at a rate of 15%, and 10% on capital gains. Compare this to investing outside of superannuation where the investment returns are included as assessable income and are taxed at our marginal tax rate. This could be as high as 49%, including the Medicare Levy.
However, where a superannuation fund is paying a pension (also referred to as an income stream) to members of the fund, the super fund is exempt from paying tax on the investment earnings it derives from the assets that are supporting the pension payments. When a super fund pays no tax on its investment earnings, this flows through as a higher investment return to the pension members of the superannuation fund.
Needless to say, many wealthy Australians aspire to maximise the amount of funds have in the ‘retirement’, or pension phase of superannuation in order to generate tax free income on their investment earnings..
In order to minimise the drain on tax revenue, the Budget contained an announcement that would limit the amount of superannuation savings that can be held in the tax exempt retirement phase. The limit is referred to as the pension transfer balance cap.
The transfer balance cap for 2017/18 is $1.6m.
This will be indexed in line with movements in the Consumer Price Index in increments of $100,000.
However, where an amount has already been counted against an individual’s pension transfer account, indexation of the cap is proportionate, being limited to that unused portion of the pension transfer balance cap.
Example, if an individual commences a pension and has $1,000,000 credited to their pension transfer balance account, they have used 62.5% of their cap. They have 37.5% of their cap unused. When indexation of the cap occurs, the indexation will be limited to 37.5% of the indexation. That is, $37,500. This individual’s unused cap, post indexation will be $637, i.e. ($1,600,000 - $1,000,000) + $37,500.
For members of defined benefit superannuation funds, including State and Federal Government funds that pay a pension to their members rather than a lump sum, changes are being made to the way their pension is taxed where the annual pension payment exceeds $100,000.
Where an individual ‘inherits’ a superannuation pension from deceased partner, that pension will also be counted against their transfer balance cap.
For those people who are already receiving a pension from their superannuation fund and their account balance exceeds $1.6m, they will be required to transfer the excessive account balance back to the accumulation account of their superannuation fund, or withdraw the benefit from superannuation.
As a result of transferring part of an account balance back to an accumulation account, the assets supporting that component will be now subject to tax on the future earnings and capital gains. To compensate for this, where assets are transferred back to the accumulation phase because of the reforms, the government has introduced capital gains tax relief.
The capital gains tax relief is the most complex area of all the reforms so we wont delve into it today. In any case, it will only impact on individuals who currently have more than $1.6m in their pension account, and in some circumstances, to individuals who are drawing a pension under the ‘transition to retirement rules’.

6. Transfer balance cap Applies to:
Amounts that may be transferred to a ‘retirement phase’ pension
Valuation of certain defined benefit and non-commutable pensions
Asset segregation for SMSFs and SAFs.
The transfer balance cap only applies to ‘retirement phase’ pensions.
That is, a pension that has commenced to be paid from an individual’s unrestricted non-preserved benefits.
Consequently, pensions paid under transition to retirement rules are excluded from the transfer balance cap as they are paid from a preserved benefit and have a cashing restriction applying (restriction on lump sum payments, and a limit on the maximum income that may be drawn each year).
A TRIS (transition to retirement income stream) is not subject to the pension transfer balance cap.
From 1 July 2017, the investment earnings arsing from a TRIS will no longer be exempt from tax at the superannuation fund level. Those earnings will be taxed in the same manner as currently applies to an accumulation account. That is, the earnings will be taxed at a rate of 15%, while capital gains will be taxed at an effective rate of 10%
While the transfer balance cap applies to account based pensions, a special valuation method applies to non-commutable pensions including defined benefit pension and market linked income streams. Basically this involves multiplying the annual income by a factor of 16 in the case of lifetime pensions, and the annual income multiplied by the remaining term in the case of non-commutable pensions paid for a fixed term.

7. Transfer balance cap
When is an amount counted against the transfer balance cap?
Pension type
When
Pre-existing pensions (ex. TTR)
1 July 2017
New pension
Commencement
TTR becoming URNP
Date of release
Non-reversionary death benefit pensions
Reversionary pensions
12 months after commencement
Pensions already being paid as at 1 July 2017 will be assessed against the individuals transfer balance cap as at 1 July Where the account balance exceeds $1.6m, it will be necessary to reduce the account balance to $1.6m on or before 1 July The failure to reduce the account balance back to $1.6m have tax consequences for the individual.
When a new pension commences to be paid from 1 July 2017, the pension is tested at the time it commences to be paid.
Importantly, once an assessment against the transfer balance cap has been made, the pension is not subsequently tested.
Therefore, if a pension was within the $1.6m cap as at 1 July 2017, or at the time it commenced to be paid if after 30 June 2017, and that pension account grew in value over time, there is no requirement to continue to reduce the account balance to keep the pension within the $1.6m limit.
Where an individual receives a pension as the result of the death of another person - usually their spouse - the pension is assessed against the beneficiaries transfer balance cap. The timing of testing will depend on whether the death benefit pension is being paid as a new pension, or as a reversionary pension. A reversionary pension involves the automatic continuation of the original pension. A reversionary pensioner is nominated within the original pension.

8. Transition to retirement
What should I be doing?
Is a TRIS still worthwhile after 1 July 2017?
Age
Is TRIS income required?
If <60, how much benefit is tax-free component?
Is there a need to quarantine tax components?
Whether a TTR pension is effective post 30 June 2017 will depend on a number of factors including:
Age – under or over 60
Whether income from a TRIS is actually required to support lifestyle – i.e. was the TRIS established simply to access the tax exemption (at the fund level) on investment earnings?
Has the TRIS been established for its original purpose – i.e. supplementing income while transitioning to retirement?
If under 60, what is the level of the member’s tax-free component
Is a pension required to quarantine, and prevent blending of tax components?

9. Concessional contributions
Key elements:
Concessional contribution cap
Division 293 tax
Constitutionally protected funds
From 1 July 2017
$30,000, or
$25,000 for all
$35,000 if 49 or older at 30/6/16
Indexed to AWOTE in $5,000 increments
Indexed to AWOTE in $2,500 increments
Lets now turn to the changes to contributions.
A concessional contribution is a contribution made by an employer on behalf of their employees. This includes the 9.5% contribution made under the Superannuation Guarantee system, and additional employer contributions made under a salary sacrifice arrangement. Concessional contributions also include personal contributions made by individuals who are eligible to claim a tax deduction for their contributions.
Concessional contributions are currently capped at a maximum of $35,000 for individuals aged 49 or older at the start of the financial year. From everyone else, the cap is $30,000.
From 1 July 2017, the cap will reduce to $25,000 for everyone. This cap will increase in line with movements in Average Weekly Ordinary Time Earnings, in $2,500 increments.
Concessional contributions are taxed as income of the superannuation fund at a rate of 15%.
High income earners pay an additional 15% tax on their concessional contributions. Currently this only applies to individuals with income of more than $300,000. From 1 July 2017, the income threshold will reduce to $250,000.
Members of constitutionally protected funds (some older style funds for State Government public sector employees) are not affected by the concessional contribution cap. From 1 July 2017, contributions made to a constitutionally protected fund will continue to be exempt from the concessional contribution cap however those contributions may impact on the ability to make concessional contributions to other funds.

10. Concessional contributions
What should I be doing?
Maximise concessional contributions before 30 June 2017
Review salary sacrifice arrangements post 30 June 2017
Review personal deductible contribution arrangements.
In the lead up to the end of the current financial year, there is an opportunity to maximise concessional contributions and take advantage of the present $30,000 or $35,000 cap.
If planning to make contributions this financial year, arrangements should be made well before 30 June 2017.
For those who have a salary sacrifice arrangement in place, and are maximising their concessional contributions, a review of the salary sacrifice arrangement for may be warranted. The concessional contribution cap will reduce to $25,000 from 1 July 2017.
If you are entitled to claim a tax deduction for personal contributions, it is also advisable to check the level of contributions being made to ensure the $25,000 cap is not going to be exceeded in This is particularly important where contributions are being made on a regular basis.

11. Non-concessional contributions
Key elements:
Annual non-concessional contribution cap
Eligibility – max. super balance
Bring forward cap
Eligibility for government co-contribution
From 1 July 2017
$180,000
$100,000
Up to $540, year bring forward
$300,000 – 3 year bring forward
Basis = 6 X concessional cap
Basis = 4 X concessional cap
As mentioned earlier, non-concessional contributions made from after tax income.
The original budget proposal to impose a lifetime cap of $500,000 has been scrapped.
Instead, the annual limit of $180,000 currently applying to non-concessional contributions, will reduce to $100,000 per annum, from 1 July 2017.

12. Non-concessional contributions
Eligibility
From 1 July 2017 NCCs may only be made by individuals with total super benefits that don’t exceed their transfer balance cap ($1.6m for ) as at the previous 30 June.
Another change announced in the Budget will have a specific impact on making non-concessional contributions is the introduction of a prohibition on making non-concessional contributions where an individual has a ‘total superannuation balance’ of more than $1.6m.
The total superannuation balance in the aggregate of all accumulation and pension superannuation balances an individual may have, spread across all super funds they may belong to.

13. Non-concessional contributions
Bring forward cap
Existing arrangements apply for – i.e. up to $540,000
Transitional arrangements for unused portion of bring forward cap triggered in or
From 1 July 2017:
Total super balance
Bring forward
Less than $1.4m
3 years - $300,000
$1.4m to $1.5m
2 years - $200,000
$1.5m to $1.6m
No bring forward - $100,000
$1.6m or more
N/A
Under present rules, an individual aged 64 of younger may bring forward up to three years contributions and effectively contribute up to $540,000 in one financial year, but then no contributions can be made in the following two years.
The three year bring forward arrangement will continue to apply from 1 July 2017 however, where a person has a total superannuation balance of between $1.4m and $1.6m they may be unable to take advantage of bringing forward three years contributions.

14. Non-concessional contributions
Bring forward cap – transitional arrangement
Only applies where the three year bring forward has been triggered in either or
Three year bring forward triggered
Transitional cap
$460,000
$380,000
Where an individual triggered their three year bring forward cap – that is they contributed more than $180,000, but less that $540,000, in either the or financial years, the remaining balance of their three year cap will be scaled back for and/or

15. Non-concessional contributions
What should I be doing?
Maximise concessional contributions before 30 June 2017:
Access higher NCC cap in
Recontribute for spouse
Maximising NCCs where member balance exceeds $1.6m
Access any unused portion of the three year bring forward amount from previous years.
For those individuals who have not triggered their three year bring forward cap in either of the two previous financial years, there is an opportunity to contribution up to $540,000 before 30 June 2017.
Furthermore, and to assist with managing to transfer balance cap of $1.6m it may be appropriate for a person to withdraw a portion of their superannuation balance, where permitted under superannuation laws, and make a non-concessional contribution for their spouse. Equalising super between partners is even more important when the Budget changes are considered.
For those people who are eligible to use their three year cap of $540,000, they may make a non-concessional contribution before 30 June 2017, even if their total superannuation balance exceeds $1.6m.

16. LISTO
Key features
Replaces the low income superannuation contribution from 1 July 2017
Returns the tax paid on concessional contributions for low income earners
Offset is 15% of eligible contributions to a maximum of $500
To qualify:
adjusted taxable income is <$37,000, and
At least 10% of ATI is from employment.
The Low Income Superannuation Tax Offset will replace the current Low Income Superannuation Contribution which was due to be discontinued from 1 July 2017.
In simply terms, the LISTO is designed to compensate low income earners by ensuring that the tax paid on their concessional contributions is not greater that the tax they would be paying is they received the payment directly as wages or salary.
Adjusted taxable income includes:
Taxable income
Adjusted fringe benefits
Target foreign income
Total net investment losses
Tax-free government pensions and benefits
Reportable superannuation contributions
Deductible child maintenance payments are deducted.

17. Deducting personal contributions
Pre 1 July 2017
From 1 July 2017
Personal deduction is available where <10% income is derived employment related activities
10% test to be removed
ITAA97 imposes conditions of ability to claim a deduction
Expect s requirements to remain, but may be simplified.
Income includes:
Assessable income
Reportable fringe benefits
Reportable employer contributions
In certain circumstances an individual may be eligible to claim a tax deduction for their personal superannuation contributions.
Generally, to claim a tax deduction for personal contributions, less than 10% of income can be derived from employment. Therefore, those eligible to claim tax deduction are generally the self-employed (sole traders and partners in a partnership), employees who derive less than 10% of their income from employment, and people not engaged in the workforce, including investors and retirees. Remember however, that if aged 65 or older, contributions can only be made to a superannuation fund is the work test is met.
From 1 July 2017, the 10% test will be removed.
This means that anyone will be able to claim a tax deduction for their personal superannuation contributions, up to a maximum of $25,000 per annum. However, if an employer is also making contributions, these are included within the $25,000 limit.
To be eligible to claim a tax deduction for personal contributions, there are requirements that need to be met including, giving an appropriate notice to the superannuation fund within a prescribed time.

18. Unused CC carry forward
Key features
The unused part of the concessional contribution cap that accrues from 1 July 2018 can be carried forward for up to 5 years.
Subject to an individual’s total superannuation balance being <$500,000 just before the start of the financial year.
Conc. Cont.
$10,000
$40,000
Unused cap*
$15,000 $0
Cum. unused
$30,000
$45,000
$60,000
$75,000
At the start of this presentation we mentioned that a number of the original 2016 budget proposals would not be proceeding. The commencement of another initiative has been deferred.
Under present superannuation laws, if a contribution cap is not fully utilised in a particular year, the unused portion of the cap is lost.
However, with effect from 1 July 2018, individuals with less than $500,000 in total superannuation benefits will be able to carry forward the unused portion of their concessional contribution cap, for up to five years.
This initiative will be appreciated by those who are unable to maximise their superannuation contributions fro a variety of reasons include absence from work as a result of taking a career break.
* Assuming the concessional contribution cap has not been indexed

19. Spouse contribution tax offset
Key features
Pre 1 July 2017
From 1 July 2017
Offset available 18% of $3,000
Unaltered
Maximum offset $540
Spouse’s income* < $13,800
Spouse income* <$40,000
Currently, when a person makes a non-concessional contribution on behalf of a low income-earning spouse, they may be entitled to claim a tax offset of 18% of the amount contributed, subject to a maximum offset of $540. To qualify, the spouse for whom the contribution is made must have an adjusted taxable income of less than $13,800. The amount of the offset phases down where the spouse’s income exceeds $10,800 and cuts out at $13,800.
From 1 July 2017, the income threshold will be increased significantly to $37,000, and cutting out when the ‘receiving’ spouses income exceeds $40,000. This will result in the tax offset for spouse contributions being available to many more individuals.
* Income = assessable income + reportable fringe benefits + RESC

20. Anti-detriment payments
Current law
Allows for a lump sum death benefit to be increased, when paid to an eligible beneficiary, to compensate for contributions tax paid during the members life.
Funded by a (future) tax deduction
New law
Tax deduction for anti-detriment payments is removed where a member dies after 1 July 2017
Funds have two years to make a payment when death occurred pre 1 July 2017.
An anti-detriment payment is an additional payment that is made by a superannuation fund on the death of a member where their benefit is paid to a dependent as a lump sum payment. An eligible beneficiary includes the spouse, children of the member, a person who had an interdependency relationship with the deceased, and others who were financially dependant at the time of the member’s death.
Where a person passes away after 30 June 2017, an anti-detriment payment may no longer be payable. Where death occurred prior to 1 July 2017, an anti-detriment payment made still be made in the following two years.

21. Where to from here? There are extensive changes
Some aspects are very complex
Opportunities exist pre 30 June 2017
Seek advice if:
Unsure about how the changes affect you
You currently have a TTR pension
You wish to make contributions before 30 June 2017
You have more than $1.6m in super
You have a SMSF.
The changes are extensive and certain aspects are very complex. For the majority of Australians, the positive changes outweigh the negative.
There are certainly opportunities that may be exploited in the current financial year.
Given the complexities that exist, having a ‘super check-up’ with a licensed financial adviser is recommended.

22. Questions?
Questions?