Superannuation changes and you Understanding your opportunities this financial year March 2017

Contents Background Benefits of boosting your superannuation Before-tax contributions After-tax contributions Retirement phase: transfer balance cap Retirement phase: Transition-to-retirement accounts Other strategies to consider for the end of the financial year

Background The Federal Government announced a number of changes to superannuation in the Budget announcement in May 2016. The majority of these were enacted into legislation in November 2016 and will be effective from 1 July 2017.

Benefits of boosting your superannuation Every little bit helps Accessing a tax-effective investment (depending on your circumstances) The amount you have in your superannuation at retirement can mean the difference between a modest lifestyle or a more comfortable one with a few luxuries. The potential to access a tax rate of 15% on before-tax contributions compared to your marginal tax rate (noting that an additional 15% tax may be applicable to higher income earners). Earnings on superannuation accounts are taxed at 15% compared to the tax rate which may be applicable to your other investments. Save for your retirement faster than relying on Superannuation Guarantee payments alone. Now might be your last opportunity to make after-tax contributions if your total superannuation balance is $1.6 million or more. If you boost your superannuation before 30 June 2017, you can also take advantage of higher contribution limits on both your before and after-tax contributions.

Before-tax (concessional) contributions for those aged 50-64 years You could contribute up to: Currently (before 30 June 2017) From 1 July 2017 $35,000 per financial year $25,000 per financial year These are made to your superannuation from your salary before tax such as Superannuation Guarantee and taxed at 15% compared to your marginal tax rate. An additional 15% tax may be applicable to higher income earners. You might be able to contribute up to $10,000 more this financial year compared to what you might be able to in future financial years from 1 July 2017.

Before-tax (concessional) contributions for those aged under 50 years You could contribute up to: Currently (before 30 June 2017) From 1 July 2017 $30,000 per financial year $25,000 per financial year These are made to your superannuation from your salary before tax such as Superannuation Guarantee and taxed at 15% compared to your marginal tax rate. An additional 15% tax may be applicable to higher income earners. You might be able to contribute up to $5,000 more this financial year compared to what you might be able to in future financial years from 1 July 2017.

Considering before-tax contributions What can you afford? What are your options? Updating contributions based on the rules What are your current total before-tax contributions? What is the additional total you could also contribute? What could you afford to contribute? Adjusting contributions if relevant for next financial year.

After-tax (non-concessional) contributions You could contribute up to: Currently (before 30 June 2017) From 1 July 2017 $180,000 per financial year $100,000 per financial year Any additional contribution you make to your superannuation that you have already paid tax on. If your total superannuation balance is $1.6 million or more, you will not be able to make after-tax contributions from 1 July 2017, unless your balance drops below this amount. Now might be your last opportunity to make after-tax contributions, depending on your balance.

After-tax (non-concessional) contributions If you haven’t already triggered it in the last two years, it is possible to use the three-year bring forward rule to contribute up to: Currently (before 30 June 2017) From 1 July 2017 $540,000 $300,000 Any additional contribution you make to your superannuation that you have already paid tax on. The three-year bring forward rule allows you to combine three years worth of after-tax contributions in one go if you haven’t previously triggered the rules in the last 2 years. So this financial year, you could contribute 3 x $180,000 = $540,000 in one go but in the future, you could contribute up to 3 x $100,000 = $300,000 in one go. You might be able to contribute up to $240,000 more using the three year bring forward rule this financial year compared to what you might be able to from 1 July 2017.

Considerations for after-tax contributions Affordability and suitability Future options International pension transfers Adjusting contributions in the future What are your current total after-tax contributions? Would contributing to superannuation be a suitable option for you compared to other ways to manage your finances? Have you previously triggered the three year bring-forward rule? What could you afford to contribute? Could you transfer internationally held pensions to your superannuation? Is your balance close to or over the $1.6 million balance meaning you may not be able to contribute in future years? Adjusting contributions if relevant for next financial year.

Changes to retirement: transfer balance cap From 1 July 2017, the maximum amount you can have invested in the retirement phase will be $1.6 million. You will be required to reduce your balance if your balance exceeds this cap, or you may incur a tax penalty. If your balance exceeds this cap, you will be required to either: Move the excess back to the accumulation phase of superannuation, or Withdraw the amount as a lump sum by 1 July 2017 or have a tax penalty applied. This deadline is extended to 31 December 2017 if the excess amount is $100,000 or less. There is capital gains tax relief available to those who take action before 30 June 2017 to ensure their pension balance is below the cap of $1.6 million.

Considerations for retirement phase: transfer balance cap Your balance Options for managing the transfer balance cap CGT relief What is your current total pension account balance? Will the balance exceed the $1.6 million cap and by what amount? Considering options for transferring compared to withdrawing the excess as a lump sum Planning next steps for reducing the pension account balance below the cap before 30 June 2017

Changes to retirement: Transition-to-retirement (TTR) pensions What’s changing? From 1 July 2017, earnings on TTR pensions will be charged at 15% compared to their current tax free status. Next steps and considerations Is a TTR still a suitable option for your needs? Other options to consider if a TTR is no longer suitable Using a Condition of Release to transfer the TTR to an Account-based pension (which continues to offer tax-free earnings).

Strategies to consider for the end of the financial year Superannuation Salary sacrifice options One-off contributions Government co-contributions Spouse super contribution tax offset Setting up a SMSF Prepaying deductible expenses Insurance premiums Investment loan interest payments (ie Margin Loans) Cost of maintenance and repairs to investment properties Setting up new investments

Disclaimer This document has been created by Asgard Capital Management Limited © ABN 009 279 592. This information is current as at April 2017. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. Superannuation is a long-term investment. The government has placed restrictions on when you can access your preserved benefits. The Government has set caps on the amount of money you can add to superannuation each year on a concessionally taxed basis. In addition, the government has set a non-concessional contributions cap. For more detail, speak with a financial adviser or visit the ATO website.