Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 207

Final sprint to three major super changes

With a week to go before the 1 July 2017 superannuation changes, high net worth (HNW) individuals must act quickly or risk being caught short.

How the changes will affect you will depend on your age, the amount held in both yours and your spouse’s (if relevant) superannuation pension and accumulation account, and potential for future contributions.

If you’re already retired, super will still provide tax-free earnings for pension account balances under $1.6 million. Even if you have more than $1.6 million in super, tax on these surplus earnings is a relatively low 15%.

If you’re under 65 and still a few years away from retirement, you can still make personal, post-tax contributions of $100,000 per annum after the deadline, or bring forward three years’ worth of contributions in one year. They’re an attractive opportunity to increase your superannuation balance before retirement, but the limits are lower than currently available.

If you’re in the early or middle stages of your career and focused on building wealth, the reduction in contribution caps might prompt you to question how you’ll accumulate sufficient assets within superannuation to meet your retirement needs. Many younger investors might also question whether super, as a long-term investment and with the level of Government interference we’ve seen recently, is the best place to build wealth at all. However, it remains the most effective structure to accumulate and preserve assets for retirement.

Investors should build their nest egg as early as possible by siphoning off a small amount of salary each pay into superannuation. You will be able to contribute up to $25,000 of your pre-tax salary to superannuation each year and pay only 15% tax on the contribution, as opposed to tax at your marginal rate.

Three key changes in superannuation

1. Transition to Retirement

A Transition to Retirement (TTR) pension is an income stream paid to a member who has reached their preservation age (currently 56) but is still working. Although currently the investment earnings from superannuation assets used to fund a TTR pension are not taxable, from 1 July 2017, earnings will be taxable in the fund at regular superannuation tax rates.

If you’re affected by this change you will need to determine whether it makes sense to continue drawing a pension or commute (stop) the pension. Once you retire or turn 65, your pension is no longer considered a TTR pension and would continue to receive tax-free earnings.

2. Pension balances over $1.6 million

If your superannuation pension balance is greater than $1.6 million you will need to move the excess amount from the pension to the accumulation part of your fund, to a spouse’s fund, or out of superannuation altogether. You can still continue to have more than $1.6 million in superannuation so long as it is held in accumulation, rather than pension phase. Penalty tax rates will apply to pension amounts in excess of $1.6 million.

3. Capital gains reset

If you’re affected by the $1.6 million pension cap or TTR rule changes, you can elect to refresh the cost base of assets in your fund. This would allow you to reset assets to their market value on 30 June 2017. If you have an SMSF with large unrealised capital gains, this could be a good opportunity to reduce future capital gains tax.

The strategies to manage the superannuation changes are complex. HNWs should seek advice from an independent financial adviser. If you are already receiving financial advice, but have had no communication about how the changes will affect you, you should be on the phone today.

 

Simon Curtain is a Director and Private Client Adviser at Hewison Private Wealth. This article does not consider the circumstances of any individual.

Please click here to complete the survey on your investment responses to the 1 July 2017 superannuation changes.

 


 

Leave a Comment:

RELATED ARTICLES

The net cost of superannuation concessions is not so gross

The mechanics of the $3 million super tax must be fixed

Prepare for the shifting sands in personal taxation

banner

Most viewed in recent weeks

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

Tariffs are a smokescreen to Trump's real endgame

Behind market volatility and tariff threats lies a deeper strategy. Trump’s real goal isn’t trade reform but managing America's massive debts, preserving bond market confidence, and preparing for potential QE.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Getting rich vs staying rich

Strategies to get rich versus stay rich are markedly different. Here is a look at the five main ways to get rich, including through work, business, investing and luck, as well as those that preserve wealth.

Latest Updates

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Superannuation

How to prevent excessive superannuation balances

There is an alternative, simpler approach which could be used to mitigate some of the difficulties that the proposed super tax has for holders of large assets such as properties, businesses and farms in SMSFs.

Shares

US shares: Ambitious multiples on ambitious EPS forecasts

Here's a detailed look at how current valuations and profit forecasts for the S&P 500 stack up versus history. The answer? Both seem excessive, making the market vulnerable to a correction or worse.

Taxation

Family trust tax: When is a loan not a loan?

A recent ruling could change the tax payable by beneficiaries of family trusts. If the ATO has previously demanded extra payments on unpaid present entitlements in your family group, you should watch this space.

Property

Things you must consider before subdividing a property

Subdividing can offer a lucrative first step into property development. Yet it comes with legal, planning and unexpected tax considerations that should be understood from an early stage to avoid surprises.

Investment strategies

5 insights that put market volatility in perspective

Though it may feel like this time is different, markets have shown resilience throughout history when confronted by wars, pandemics and other crises. In many cases, the best course of action has been none at all.

Strategy

Concerns about China's rise to power seem overblown

China has always managed its affairs in a very different way to Western countries and empires. For those concerned about China's rise as a global power, the big question is whether this approach could change.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.