2016 Budget - changes to superannuation
The Treasurer, Scott Morrison, revealed his first Federal Budget on 3 May 2016. This Budget included some major changes to superannuation.
Below is a summary of the key changes to superannuation.
Reduction in concessional contributions cap
The cap on concessional contributions has been reduced. Concessional contributions are basically either super contributions your employer pays (currently 9.5% of your wages), or if you are self employed, super that you claim as a tax deduction.
|Age under 50||Age over 50|
|From 1 July 2017||$25,000||$25,000|
Tax deductions for personal superannuation contributions
From 1 July 2017, all individuals up to age 75 will be able to claim a tax deduction for personal super contributions. Individuals who are partially self employed and partially employed will benefit from these changes.
Lifetime cap for non-concessional contributions
Effective from 3 May 2016, the Government has introduced a lifetime non-concessional cap of $500,000. This measure replaces the existing caps and will take into consideration all non-concessional contributions since 1 July 2007. The existing cap was $180,000 per year (or $540,000 every 3 years under the “bring-forward” rule for people aged under 65).
More tax on contributions for high income earners
Currently, individuals earning over $300,000 pay an additional 15% tax on concessional super contributions. From 1 July 2017 the income threshold at which high income earners pay additional contributions tax will be $250,000.
Transition to retirement income streams
Currently, individuals aged 56 to 65 who are still working are able to access their superannuation, via a transition to retirement (TTR) pension. This WAS a great tax minimisation strategy as the super fund earnings were no longer taxed. From 1 July 2017 the tax exempt status of the super fund earnings will be removed. Under the new rules, people can continue or start TTR pensions, however the earnings on these assets will now be taxed at 15%.
$1.6 million pension cap
From 1 July 2017, a $1.6 million cap on the total of super that can be used to commence a pension will be introduced. These rules will limit the amount that individuals can transfer into a tax free retirement account. This cap does not restrict the amount you can have in a superannuation fund. It just limits the amount of the capital whose earnings will be tax free to $1.6 million.
If you have any questions about this, or anything else, feel free to contact our office.