Demystifying superannuation - What you should know

By Cathi Norman - June 29, 2018

Many superannuation rules have recently changed, necessitating a review of an individual’s superannuation setup. Below is an overview of some of the key areas you should be aware of.

Read: Contact Magazine Winter 2018


The work test has not changed and still applies to individuals aged 65 and over.

  • In order to make a contribution those aged between 65 and 75 must satisfy a work test which entails working at least 40 hours over a consecutive 30-day period.
  • If aged 75 and over, individuals cannot make super contributions unless mandated, such as superannuation guarantee contributions.
  • This test applies to both concessional and non-concessional contributions.

Commencing 1 July 2017 there are additional rules regarding total superannuation balances with which individuals must comply prior to making certain contributions.

Concessional contributions

There are several changes to the concessional contributions cap as detailed below.

  • While the superannuation guarantee rate remains the same (9.5%), the annual cap is now $25,000 per year for everyone regardless of age.
  • Individuals seeking to maximise their concessional superannuation contributions can utilise salary sacrifice (if they have a valid salary sacrifice arrangement) or through personal concessional contributions to their superannuation fund.
  • Salary sacrifice arrangements must be entered into prior to an employee’s work being performed, which typically means arrangements are made at the beginning of a financial year.
  • Individuals wishing to make a personal contribution must ensure they lodge an Intent to Claim a Superannuation Deduction form with their superannuation fund and receive an acknowledgement back from the fund. This enables the individual to claim a tax deduction for the personal contribution in their individual tax return. Note, the 10% employment income rule has now been scrapped.
  • The income threshold at which an individual has to pay an extra 15% contributions tax has now been reduced from $300,000 per year to $250,000 per year.

What are the types of contributions?

Superannuation contributions fall into two main categories: concessional and non-concessional contributions. The distinction between the two has important implications for your personal wealth.

  • Concessional contributions: These are pre-tax contributions such as superannuation guarantee contributions made by an employer and salary sacrificed contributions. They also include personal contributions where an individual is claiming a tax deduction in their individual tax return.
  • Non-concessional contributions: These are after-tax contributions for which neither you nor your employer claim a tax deduction.

Non-concessional contributions

Like concessional contributions, rules governing non-concessional contributions have also changed. Effective 1 July 2017, the annual non-concessional cap reduced from $180,000 per year to $100,000 per year.

  • It may be possible to bring forward the next two years’ worth of contributions to make a lump sum contribution of $300,000, depending on an individual’s age and total superannuation balance.
  • Individuals cannot apply this bring forward rule after the year in which they turn 65. Upon turning 65, individuals can use the bring forward rule in the same financial year. However, from their 65th birthday they must pass the work test and must make the contribution in multiple lots of no more than $100,000 at a time to avoid their superannuation fund rejecting the contribution.
  • Individuals are no longer permitted to make non-concessional superannuation contributions if their total superannuation balance is $1.6 million or over as at 30 June of the prior financial year.
  • An individual’s total superannuation balance also affects their use of the bring forward rule. If an individual’s total superannuation balance is between $1.5 and $1.6 million, the most that can be contributed is $100,000. If it is between $1.4 and $1.5 million the contribution limit is $200,000.  However, if an individual’s total superannuation balance is under $1.4 million the full bring forward contribution of $300,000 can be applied.

Note: An individual’s total superannuation balance includes the total balance of all their superannuation accounts, not just their balance in the fund they are contributing to. It also includes amounts that are in the process of being rolled over between superannuation funds.


There are important changes to pension rules, which affect both those transitioning to retirement and those already in retirement.

Transition to retirement pensions

  • These are not included as retirement phase pensions. This means earnings on investments used to support a Transition to Retirement (TTR) pension are no longer tax-free and instead taxed at 15%. Individuals who do not rely upon pension payments to cover personal living expenses may now consider stopping their TTR pension if it is not part of an additional strategy.

Retirement phase pensions

  • Retirement phase pensions (including full account-based pensions) now operate under the $1.6 million transfer balance cap rules.
  • From 1 July 2017, the most superannuation an individual can transfer to a retirement phase pension is $1.6 million.
  • If an individual commuted their retirement phase pension as at 30 June 2017 to reduce the balance to $1.6 million, there is no issue if the balance of the pension account subsequently exceeds $1.6 million due to investment earnings and valuations. Further commutations are unnecessary as market fluctuations and investment earnings do not increase or decrease an individual’s transfer balance cap. Likewise, if an individual’s pension account reduces below $1.6 million due to pension payments and investment valuations, it is not possible to top up the account to $1.6 million.
  • Self-managed superannuation fund (SMSF) members are subject to new transfer balance account reporting requirements. Where the SMSF has a member (including an accumulation account member) with a total superannuation balance of $1 million or more, they will need to report transfer balance cap events quarterly from 1 July 2018. Other SMSFs that have no members with total superannuation balances of $1 million or above must report these events annually by the due date of the respective SMSF’s annual return.

Contributing the proceeds of Downsizing to Superannuation

The government has introduced a new initiative aimed to remove disincentives for people in the retirement phase to downsize their homes.

  • From 1 July 2018, individuals aged 65 or over can contribute up to $300,000 from the proceeds of the sale of a primary place of residence to the individual’s superannuation fund. This could potentially amount to a total of $600,000 per couple.
  • To be eligible, individuals must have owned the home for at least ten years.
  • Unlike other situations in which contributions are made from 65 years of age, no work test is required and the individual’s total superannuation balance does not need to be less than $1.6 million.
  • Caution should be taken for those receiving government pensions, as this may affect income/asset test assessments.

The superannuation system is continually evolving, with many regular changes that have implications for your superannuation and retirement wealth. Contact Pitcher Partners to learn more about how we can assist in demystifying the complexity of your superannuation.

Any financial product advice is provided by Pitcher Partners (SA) Financial Pty ltd (AFSL No. 487781).  The advice provided is general in nature and is not personal financial product advice. The advice provided has been prepared without taking into account your objectives, financial situation or needs and because of this you should, before acting on it, consider the appropriateness of it having regard to your objectives, financial situation and needs. You should carefully read and consider any Product Disclosure Statement (PDS) that is relevant to any financial product that has been discussed before making any decision about whether to acquire the financial product.

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