Superannuation Caps and changes- update. Presented by Jenneke Mills Senior Technical Consultant MLC Technical Services MLC Advice and Professionalism

Transcription

1 Superannuation Caps and changes- update Presented by Jenneke Mills Senior Technical Consultant MLC Technical Services MLC Advice and Professionalism

2 Superannuation Caps & changes- update SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 2

3 Superannuation Caps & changes- update SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 3

4 Superannuation Caps & changes- update Ha! Remember when we introduced Simple Super! SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 4

5 Superannuation Caps & changes- update Advice or guidance - almost always required If no financial adviser, who provides advice? Person administering /facilitating contributions General information vs personal advice? SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 5

6 Superannuation Agenda Super choice Contributions Rule changes Super Guarantee SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 6

7 7 S U P E R A N N U A T I O N : C O N T R I B U T I O N S C H A N G E S P R E S E N T E D B Y M L C T E C H N I C A L S E R V I C E S

8 Concessional contributions

9 Disclaimer This presentation has been prepared by Advice and Professionalism, a division of GWM Adviser Services Limited (ABN , AFSL ) ( GWMAS ), a member of the National Australia Bank group of companies ( NAB Group ), registered office at Miller Street, North Sydney This advice may not be suitable for you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax and/or legal advice prior to acting on this information. Information in this presentation is accurate as at 29 October In some cases the information has been provided to us by third parties. While it is believed the information in this publication is accurate and reliable, the accuracy of that information is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee nor any member of the NAB Group, nor their employees or directors gives any warranty of accuracy, or accepts any responsibility for errors or omissions in this presentation. Any case studies in this presentation are for illustration purposes only. The investment returns shown in any case studies in this presentation are hypothetical examples only and do not reflect the historical or future returns of any specific financial products. Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns. Any tax information provided in this presentation is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent. SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 9

10 QUESTION 1 Ken is 61. What is his concessional contributions cap this year? SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 10

11 Ken is 61. What is his concessional contributions cap this year? $30,000 $25,000 $100,000 He is too old to contribute SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 11

12 Concessional contributions Cap changes $25,000, regardless of age Excess taxed at Marginal Tax Rate* Indexed in $2,500 increments *Plus Contributions Charge. Excess not withdrawn from fund will also count towards the non-concessional contributions cap in the year that the excess occurred SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 12

13 Concessional contributions Annual concessional cap No obligation on employer (or super fund) to monitor caps In fact, SG obligation may be > cap! Up to individual to monitor caps SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 13

14 QUESTION 2 Rick is paid a bonus of $5,000. He wants to make a Concessional Super contribution. Which of the following is correct? SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 14

15 Rick is paid a bonus of $5,000. He wants to make a super contribution. Which of the following is correct? He can salary sacrifice the bonus, as long as he makes the request before it is paid He can make a post-tax non-concessional contribution He may make a personal after-tax contribution then claim a personal tax deduction Hasn t he got anything better to do with his money?! SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 15

16 Concessional contributions Personal deductible contributions Bonus payments? Employeesmay not want to commit to regular salary sac Salary sacrifice benefits and entitlements yet to be accrued Redundancy and termination payments? SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 16

17 Concessional contributions Personal deductible contributions Previously- had to earn <10% of total income from employment Meant that employees generally unable to make personal deductible contributions From 1 July 2017, no 10% test, which means all individuals may be able to claim a tax deduction for personal contribution SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 17

18 Concessional contributions Personal deductible contributions With Salary Sacrifice Salary inc bonus $95,000 $95,000 Salary Sacrifice $5,000 $0 Assessable income $90,000 $95,000 Less deductions $0 $5,000 Taxable income $90,000 $90,000 Tax payable (personally) Contributions 15% $21,857 $21,857 $750 $750 With personal deductible contribution SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 18

19 Concessional contributions Personal deductible contributions Make contribution Submit tax return Submit Notice of Intent to Claim Form to Super Fund May lodge a variation notice Receive fund acceptance SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 19

20 Concessional contributions Personal deductible contributions Legislation provides NO discretion to the fund! 1. Notice of intent form must be submitted by earlier of: Lodgement of tax return End of next FY 2. Notice not valid if fund no longer holds contribution Pension commenced Rollover Withdrawal SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 20

21 Personal deductible contributions Avoiding issues! Seek further advice and guidance from your financial planner and/or registered tax agent! SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 21

22 Personal deductible contributions So which option is best? Salary Sacrifice Personal Deductible Where SG not reduced SG not offered Regular income SG calculated on reduced salary Discipline/ mental accounting Bonus or redundancy Future salary Irregular income or unknown capacity to contribute SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 22

23 Concessional contributions Personal deductible contributions May have already seen impacts from a business perspective Employees may seek to change their contribution arrangements No change to requirements for payroll all done at personal level Personal level: Tax advice, and remember, Notice of Intent! SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 23

24 QUESTION 3 Rocco s gross salary is $75,000. He receives a performance bonus of $15,000. He salary sacrifices $10,000 to superannuation. He terminates employment and receives lump sum annual leave of $10,000. SG is generally payable on? SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 24

25 Rocco s gross salary is $75,000. He receives a performance bonus of $15,000. He salary sacrifices $10,000 to superannuation. He terminates employment and receives lump sum annual leave of $10,000. SG is generally payable on? $75,000 $80,000 $110,000 $90,000 SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 25

26 Super guarantee Salary sacrifice and entitlement to SG SGR 2009/2 SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 26

27 Super guarantee Salary sacrifice and entitlement to SG STATUS: Bill before Senate (introduced to Senate 13 Nov 2017) Treasury Laws Amendment (Improving Accountability & Member Outcomes in Super Measures No. 2) Bill 2017 SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 27

28 Super guarantee Salary sacrifice and entitlement to SG Track progress of legislation! If system changes required, start preparation Staff/Payroll education If greater total reportable employer contributions for employee which may create excess- what to do? SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 28

29 QUESTION 4 Georgie has two employers in 2020, earning $150,000 from each. Total SG is $28,500, creating an excess contribution of $3,500. SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 29

30 Georgie s options are Ask one of her employers to stop contributing once she reaches the cap Hold insurance inside super so premium payment reduces the excess She can t do anything other than receive an excess notice from the ATO, then can make a decision to withdraw the excess Ask her employer to have $3,500 removed from the fund SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 30

31 Super guarantee contributions Excessive concessional contributions ATO will issue excess determination Cannot withdraw excess in advance to avoid issue Taxed at individual s marginal tax rate, plus a contributions charge $25,000pa Concessionally taxed (up to 15%) SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 31

32 Super guarantee contributions Opt-out proposal STATUS: Bill before Senate (introduced to Senate 25 June 2018) PROPOSED COMMENCEMENT 1 JULY 2018 Employer A 9.5% $150,000 ($37,500pq) Employer B 9.5% $150,000 ($37,500pq) $28,500 SG obligation creates excess CC Only where person has multiple employers Apply to ATO for employer shortfall exemption certificate for a quarter May negotiate with employer to receive additional cash or noncash remuneration Employer doesn t have to comply with certificate Once issued by ATO for a quarter, cannot be revoked SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 32

33 Super guarantee contributions Opt-out proposal Individual makes application Application must be lodged to ATO 60 days before start of quarter Other points good to know If circumstances change, parties can agree to ignore certificate Multiple certificates possible- but one employer must be contributing SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 33

34 Super guarantee contributions Opt-out proposal Understand impact on retirement savings Where to direct surplus cashflow Negotiate with employer Understand options SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 34

35 Super guarantee contributions Opt-out proposal Track progress of legislation! Staff/Payroll education If system changes required, start preparation Consider preferred business approach SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 35

36 QUESTION 5 It is July The annual concessional cap is $25,000. Harry has returned to work after having two years off and made no super contributions during that time. His CC cap is. SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 36

37 Concessional contributions Proposed catch-up rule It is July The annual concessional cap is $25,000. Harry has returned to work after having two years off. His CC cap is. $30,000 $25,000 $75,000 He is too old to contribute SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 37

38 Concessional contributions Catch-up concessional contributions Must meet ordinary eligibility rules for CC Can carry-forward for 5 years only, then ceases Total Super Balance <$500,000 prior 30 June Total Super Balance broadly = accumulation, pension + in-transit rollovers SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 38

39 1 July July July July 2023 Concessional contributions Catch-up concessional contributions CC Cap $25,000 Concessional contributions $0 CC Cap $25,000 Plus. Amount carried forward: $25,000 CC Cap $25,000 Plus. Amounts carried forward: $50,000 Concessional contributions $0 Effective CC cap available $75,000 SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 39

40 Concessional contributions Catch-up concessional contributions Who keeps track? Individual! (Not on MyGov) No obligation for employer to monitor or reconcile total available cap What if business process gives employee warning when contributions approach cap? SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 40

41 Concessional contributions Catch-up concessional contributions If a flag exists in system for employees salary sacrificing? No legislative obligation to monitor No change to employer contribution process or obligation automatically SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 41

42 QUESTION 6 Which of the following is correct SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 42

43 Which of the following is correct All Australian s have Super Choice All Australian s should have super choice! From 1 July 2018, all Australian s have super choice From 1 July 2018, most Australian s may have super choice SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 43

44 Super choice Extension of Choice laws Treasury Laws Amendment (Improving Accountability and Member Outcomes in Super Measures No. 2) Bill 2017 Before Senate New agreements/ determinations From 1 July 2018 Exceptions will apply to defined benefit funds Won t apply to agreements/ determinations in force before that time If no election made, default arrangement applies Post 1/7/18 agreements: employer must provide Choice Form SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 44

45 Super choice Extension of Choice laws Keep an eye on legislation Systems and processes? May need to issue Choice forms to certain employees SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 45

46 Anything else?

47 Super contribution changes Anything else? Downsizer contributions First Home Super Saver Scheme Spouse Contributions Super Amnesty SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 47

48 Super contribution changes Anything else? Beware: auto rollovers and account consolidation Monitor your caps and total super balance Remember: conditions of release! SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 48

49 Super contribution changes Summary Concessional cap No requirement to action Obligation on individual to monitor Personal deductible contributions Speak to accountant and/or financial adviser Important steps must be followed! No additional requirementsemployer Salary sacrifice and SG Currently, Salary Sacrifice OTE Proposed to change 1 July 2018 Keep an eye on legislation! May need to commence review of systems SG Opt-out Terms of agreement or contract may offer greater support Keep an eye on legislation May need to consider business direction/systems Catch-up concessional contributions Up to individual to monitor May need to review warning systems Systems and processes- Super Choice prepare for changes SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 49

50 Super contribution changes Wrap up SUPERANNUATION: CONTRIBUTIONS CHANGES PRESENTED BY MLC TECHNICAL SERVICES 50

51 Thank you Jenneke Mills Senior Technical Consultant MLC Technical, Advice and Professionalism