2016 Federal Budget update
A raft of changes to super were announced, most targeting the tax benefits of super for high income earners and offering more incentives to people with low incomes and low balances.
Overall more than a dozen changes were announced.
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.
Keep in mind that all the budget changes are still only proposals and won't take effect until they're passed by parliament, except the change to the after tax contribution cap which will take effect immediately.
After more information?
As you’ll see, there are a lot of changes to super in this year’s budget. 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
Summary of changes to super
- From 1 July 2017, the Low Income Super Contribution (LISC) will be replaced with an identical Low Income Superannuation Tax Offset (LISTO).
- From 1 July 2017, people 75 and under can claim their personal super contributions as a tax deduction.
- Effective 7.30pm yesterday (3 May 2016), the total amount of after-tax money you can contribute to super over your life and not be taxed, will be capped at $500,000. Previously you could contribute up to $180,000 per year or $540,000 every three years if you’re under 65.
- From 1 July 2017, there will be a $1.6 million cap on the amount of super you can transfer tax-free into a pension. Importantly, if you already have a pension with a balance over $1.6 million you will be affected and should review your circumstances prior to 1 July 2017.
- From 1 July 2017, 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. Currently, the cap is $30,000 per year for people under 50 and $35,000 per year for people 50 and over.
- From 1 July 2017, if you have less than $500,000 in super and don’t use up all your annual before-tax contribution cap, you’ll be able to make catch-up before tax contributions in future years using a carry forward of the unused amount from the previous five years. This applies to unused cap amounts from 1 July 2017.
- From 1 July 2017, people earning $250,000 and over will have their before tax contributions taxed at 30%. Currently this higher tax applies to people earning over $300,000.
- From the 1 July 2017 the ‘work test’ for people aged 65 to 74 to make super contributions will be removed.
- From 1 July 2017, people with a ‘transition to retirement pension’ will have their pension earnings taxed at 15%. Currently these aren’t taxed.
- The income threshold for people to take advantage of the low income spouse super offset will increase from $10,800 to $37,000.
- The ‘anti-detriment’ rule will end on 1 July 2017, which means super funds will no longer be able to increase lump sum super death benefits when paying them to eligible beneficiaries.