Q. I have been reading about the super changes from 1 July 2017. As a Self-Managed Super Fund Trustee (SMSF), I am concerned that I might miss something or underestimate the impact of the changes. What changes should I be aware of?

A: With many of the changes announced in the 2016 Federal Budget now passed by Parliament, there is a new amount of certainty you can have when approaching your planning.

Some trustees are confused as to whether previous announcements have become law such as the lifetime non-concessional contribution limit of $500,000. This change was scrapped and replaced with a reduction to the non-concessional contribution limit and a $1.6 million non-concessional contribution cap.

We are working with existing and prospective clients to determine the impact of the changes and assisting in their action plans prior to 30 June 2017. Your action plan and impact to your retirement planning will depend upon your circumstances, however here is a list of the key areas you need to consider:

1. Trustee Education – ensuring you understand the changes along with the basic requirements of your role trustees is essential. In a recent blog post (click here) we outlined how the super changes will impact your role and what you can do.

2. Updating your Deed – For all superannuation funds, the Trustees should consult the rule book which is the deed before making any decisions. At the very least, the rule book should be upgraded every few years and whenever there are changes to superannuation legislation. In a recent blog post (click here) we outlined the importance of having the rule book updated which allows you take advantage of superannuation changes.

3. Revising your Transition to Retirement (TTR) income swap Strategy – If you have one in place or planning to commence one. From 1 July 2017, the investment earnings contained within the TTR pension will be subject to a maximum tax of 15%. This is a significant change from the nil tax on earnings at present. This means you need to maximise the opportunity this financial year and possibly alter the strategy from 1 July 2017. For a more detailed analysis, refer to our recent blog post (click here)

4. Planning for the reduced concessional contribution cap – As part of the super changes from 1 July 2017, the Government has reduced the concessional contribution cap to $25,000 regardless of your age. Do you need to consider making maximising the current higher contribution limits for this financial year? Refer to our recent blog post (click here). You might be able to take advantage of the “Catch up concessional contribution cap” (CUCC) coming into effect from 1 July 2018.

Its best to seek advice and ensure you have a personalised plan that is based on what your retirement will look like, how much you will need to live on and how long will it last. You also need to consider other structures such as trusts or investment bonds as other possible solutions.

5. Planning for the $1.6 million non-concessional contribution cap – If you have a total superannuation balance of $1.6 million or more at 30 June 2017, then you will not be able to make further non-concessional contributions in the 2017/18 year. Even if you are under this limit, the annual non-concessional contribution limits will reduce for contributions made on or after 1 July 2017. However, you could take advantage of the current contribution rules prior to 30 June 2017. Do you need to consider making additional contributions prior to 1 July 2017, refer to our recent blog post (click here)

6. The impact of the $1.6 million transfer balance pension (TBP) cap – Broadly, the $1.6 million TBP cap is a limit imposed on the total amount that a member can transfer into a tax-free retirement pension phase account from 1 July 2017.

Any excess funds contains in existing retirement pension phase accounts above the $1.6 million cap will need to be returned to the accumulation phase or withdrawn from superannuation before 1 July 2017 to avoid penalties. In practical terms, trustees might need to consider undertaking a restructure of their pensions prior to 1 July 2017. This change can be confusing when you need to consider the taxation implications (including capital gains). In a recent blog post (click here) we outlined some of the issues that you need to consider and what actions might be required prior to 30 June 2017.

7. Abolishment of segregated pension assets for taxation purposes for certain SMSFs – This is a complicated area of planning. If your SMSF is segregated and has pensions in place, you may need to seek advice. Combining this with the introduction of the $1.6 million transfer balance pension cap, the complexity involved will require a proactive approach by working with the funds accountant.

So what is next?

The superannuation changes have been widely felt and depending upon your circumstances, you might have a lot of work to do. To ensure you can identify all of the key areas to be addressed and make an informed decision, seek advice from a qualified financial adviser as soon as possible.

Article written by Damian Hearn, WealthPartners Specialist Adviser