2016 Federal Budget - proposed super changes
Unless you’ve been living under a rock, you’d be aware that the Australian Government delivered the Federal 2015-16 Budget this week! There are numerous changes proposed in this Budget that will affect us all in one way or another. With regards to superannuation, CPA have prepared a useful summary of the proposed changes:
Saving for retirement
- Low-income earners will benefit from the Low Income Superannuation Tax Offset, which replaces the Low Income Superannuation Contribution when it expires on 30 June 2017. This ensures someone earning less than A$37,000 doesn’t pay more tax on their contributions than their take-home pay.
- Concessional caps will be able to be carried forward for up to five years by individuals where balances are A$500,000 or less to enable catch-up superannuation contributions.
- Restrictions for people aged below 75 allowing a tax deduction for personal contributions to eligible superannuation funds up to the concessional cap will be lifted.
- Australians aged 65 to 74 will be able to make contributions to superannuation under the same contribution acceptance rule that currently apply for all individuals under 65.
- Retirement income products and their developers will benefit from the removal of tax barriers to their development. The tax exemption on earnings in the retirement phase will be extended to products such as deferred lifetime annuities and group self-annuatisation products.
- The taxation of earnings in Transition to Retirement Income Streams will reduce the incentive for them to be used to minimise tax (effective 1 July 2017).
- The removal of the anti-detriment provision means no further refunds of contributions to tax paid over a lifetime when a death benefit is paid (effective 1 July 2017).
- Non-concessional cap – a new A$500,000 lifetime non-concessional cap will be introduced starting from 7.30 pm Budget night, 3 May 2016.
Retirees
- Retirees with superannuation account balances in excess of $1.6 million will be required to reduce their retirement balance to $1.6 million by 1 July 2017. Excess balances for these people may be converted to superannuation accumulation phase accounts – thus losing their tax-free status.
High income earners
- The 30% contributions tax rate will now be imposed on people earning A$250,000 a year (including concessional contributions), down from A$300,000.
- At the same time, the government will reduce the annual concessional contributions cap to A$25,000 a year.
Please refer to CPA's article for further information and summary of the budget.
It’s worth remembering that most of the major changes announced in the Budget are only proposed, and won’t come into effect until they’re passed by both Houses of Parliament. However if you would like to understand how the proposed changes could impact you and your family, please contact us.
