April 2018 – Superannuation Update

Superannuation thresholds and caps

Just a brief update on some recently confirmed Superannuation thresholds and caps relating to the 2018/19 income year.

  • Non-Concessional Contributions cap will remain at $100,000*.
  • Concessional Contributions cap will remain at $25,000*.
  • Division 293 tax threshold will be $250,000.
  • The maximum superannuation co-contribution entitlement for the 2018/19 income year will remain at $500.
    (The Lower income threshold that qualifies for the full $500 entitlement is $37,697 and the higher income threshold where the entitlement gets gradually phased out is is $52,697)
  • General transfer balance cap remains $1.6m.
  • Defined benefit income cap remains $100,000.

Division 293 tax is an additional 15% tax on the concessional contributions of individuals with income over the threshold ($250,000). If you unsure if this might affect you please contact the office if you have any questions.

* – Your ability to make contributions is impacted by your age and total superannuation balance. If you would like to know more about the factors that allow you to make superannuation contributions please contact the office.

No need to actually ‘downsize’ for ‘downsizer contributions’

From 1 July 2018, individuals aged 65 or over may use the proceeds from the sale of an eligible dwelling that was their main residence to make superannuation contributions, up to a maximum of $300,000 per person (i.e., up to $600,000 per couple), without having to satisfy the age or gainful employment tests that usually apply.

This measure was announced in the 2017/18 Federal Budget, and aims to provide an incentive for older Australians to ‘downsize’ their home.

Importantly, it should be noted that there is no requirement for an individual to actually ‘downsize’ by acquiring a smaller property, or to even acquire another property at all.

In this regard, all that is required is that the individual (or their spouse) ‘downsizes’ by selling their ‘main residence’.

The individual can then move into any living situation that suits them, such as aged care, a retirement village, a bigger or smaller dwelling than the one sold, a rental property, or living with family.

Also, the property sold does not need to have been the individual’s (or their spouse’s) main residence during their entire ownership of it, provided the property was owned for at least 10 years and was their main residence at some time during the ownership period.

The sale of an investment property that at one stage was their main residence may enable an individual (or their spouse) to make downsizer contributions.