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

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Latest Updates

Economy

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Investing

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Property

Australian house price speculators: What were you thinking?

Australian housing’s 50-year boom was driven by falling rates and rising borrowing power — not rent or yield. With those drivers exhausted, future returns must reconcile with economic fundamentals. Are we ready?

Shares

ASX reporting season: Room for optimism

Despite mixed ASX results, the market has shown surprising resilience. With rate cuts ahead and economic conditions improving, investors should look beyond short-term noise and position for a potential cyclical upswing.

Property

A Bunnings play without the hefty price tag

BWT Trust has moved to bring management in house. Meanwhile, many of the properties it leases to Bunnings have been repriced to materially higher rents. This has removed two of the key 'snags' holding back the stock.

Investment strategies

Replacing bank hybrids with something similar

With APRA phasing out bank hybrids from 2027, investors must reassess these complex instruments. A synthetic hybrid strategy may offer similar returns but with greater control and clearer understanding of risks.

Shares

Nvidia's CEO is selling. Here's why Aussie investors should care

The magnitude of founder Jensen Huang’s selldown may seem small, but the signal is hard to ignore. When the person with the clearest insight into the company’s future starts cashing out, it’s worth asking why.

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.