In the 2016-17 Federal Budget the government announced a number of far reaching changes to super. Most of the changes target the tax benefits of super for high income earners and offer more incentives to people with low incomes and low balances.
The government was keen to make clear that the majority of superannuation savings flowing from the Budget will come from the top 4% of balances. Below is a list of the key changes.
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As you’ll see, there are a lot of changes. If you’re unsure how you’re affected or have any questions, we’re here to help. Simply give us a call on 13 MINE (13 64 63) or email email@example.com and we’ll put you in touch with Mine Wealth + Wellbeing Financial Advice to discuss your situation.
Summary of changes to super
- From 2018-19, if you have less than $500,000 in super and don’t use all of your annual before tax contribution cap, you’ll be able to make catch up contributions with unused cap amounts from the previous five years.
- There’ll be a $1.6 million limit on how much super you can transfer tax free to a pension. If you have more than $1.6 million in a pension on 1 July 2017, you’ll need to transfer the excess amount back into a super account where earnings are taxed at 15%.
- The limit or cap on before tax money you can contribute to super, and be taxed at the low super tax rate, will reduce to $25,000 for everyone. The cap is currently $30,000 for people under 49 and $35,000 for people 50 and over. This cap amount may change each financial year in line with the Consumer Price Index.
- If you earn more than $250,000 per year, your before tax contributions will be taxed at 30% rather than 15%. Currently this higher tax applies to people earning over $300,000.
- The limit or cap on after tax money you can contribute to super and be taxed at the low super tax rate, will reduce to $100,000 per year or $300,000 over three years if you’re under age 65. The cap is currently $180,000 per year or $540,000 over three years if you’re under age 65. If you have more than $1.6 million in super you can’t make after tax contributions. If you have between $1.4 and $1.6 million in super your $300,000 three year cap will be lower. You can find more information at the Australian Tax Office’s website.
- People under 65 and those aged 65 to 74 who meet the work test, will be able to claim after tax super contributions as a tax deduction. These amounts will count towards your before tax contributions cap ($25,000 next financial year) and be taxed at 15%.
- The income thresholds to be eligible for the spouse super contribution tax offset will increase for people making super contributions to their spouse’s super account. The thresholds will be $37,000 for the full offset and between $37,000 and $40,000 for a part offset. If your spouse makes over $40,000 you won’t be eligible for any offset when you make contributions to your spouse’s account.
- People with a pre retirement pension will have their investment earnings taxed at 15% from 1 July 2017. Currently investment earnings aren’t taxed.
- From 1 July 2017, ‘anti detriment’ payments will no longer be paid. This payment is made when super is paid to an eligible beneficiary on death. It is effectively a refund of contributions tax paid by the member. If a person dies before 1 July 2017, then an anti detriment payment is still possible if it’s paid before 30 June 2019. From 1 July 2019, no anti-detriment payments will be paid regardless of the date of death.
- The Low Income Super Contribution (LISC) has been renamed the Low Income Superannuation Tax Offset (LISTO). Only the name of the contribution is changing. This renaming has no impact on the benefit as it will continue to operate as it does now.