Below is an overview of various superannuation measures announced in the 2016/17 Federal Budget, excerpted from the 20th edition of the Australian Master Superannuation Guide, updated to 1 July 2016. This book is the companion Guide to the 2017 Australian Superannuation Legislation title.
Better targeting of superannuation tax concessions
The government will better target superannuation tax concessions by:
- Introducing a $1.6m balance cap on the total amount of superannuation that can be transferred into the tax-free retirement phase (see “Restriction on superannuation balance transfer” below)
- Extending the 30% tax on concessional contributions to those earning over $250,000 (including concessional contributions) (see “Division 293 tax and cap on concessional contributions” below)
- Reducing the annual cap on concessional contributions to $25,000 (see “Division 293 tax and cap on concessional contributions” below)
- Introducing, from Budget night, a lifetime cap of $500,000 on non-concessional contributions (see “Lifetime cap on non-concessional contributions” below), and
- Introducing the Low Income Superannuation Tax Offset to replace the Low Income Superannuation Contribution when it expires on 30 June 2017 (see “Low income superannuation tax offset” below).
Additional changes will provide broadly commensurate treatment for members of defined benefit funds and constitutionally protected funds (see “Changes to defined benefit schemes” below).
Enhancing flexibility and choice
The government proposed the changes below to provide greater flexibility and choice in saving for retirement:
- Lift the current restrictions to allow all Australians under the age of 75 to claim a tax deduction for personal contributions to eligible superannuation funds up to the concessional cap (see “Tax deduction for personal contributions” below)
- Allow, for the first time, the carry forward of unused concessional caps to enable individuals with superannuation balances below $500,000 to make “catch-up” superannuation contributions (see “Lifetime cap on non-concessional contributions” below)
- Extend the eligibility for individuals to claim a tax offset for contributions made to their low income spouse’s superannuation (see “Tax offset for spouse contributions” below)
- Lift certain restrictions on making superannuation contribution that apply to Australians aged 65 to 74 and instead apply the same contribution acceptance rule for all individuals under 75 (see “Acceptance of contributions for individuals aged 65 to 74” below).
Additional measures to improve integrity
The proposed $1.6m limit on the amount that can be transferred into the retirement phase and $500,000 lifetime non-concessional cap (see above) are key elements to improve confidence that the system is being used for its core purpose. In line with the objective of superannuation, the Budget measures will improve public confidence in the superannuation system by reducing the extent to which it is used for tax minimisation and estate planning purposes. In addition, the government will:
- Tax the earnings of “Transition to Retirement Income Streams” to reduce the incentive for them to be used as a vehicle to minimise tax (see “Tax exemption on TRIS earnings” below), and
- Remove the outdated anti-detriment transitional provisions, which in practical terms, provide a refund of contributions tax paid over a lifetime (see “Anti-detriment payments” below).
The Budget superannuation measures will generally take effect from 1 July 2017.
The Budget papers are available at www.budget.gov.au and Treasury ministers’ media releases are available at ministers.treasury.gov.au; kmo.ministers.treasury.gov.au/media-release/050-2016.
The government also proposes to remove tax barriers to the development of new retirement income products by extending the tax exemption on earnings in the retirement phase to new products (see “Enhancing choice in retirement income products” below).
For a more detailed analysis of these recent changes and implications, get your Australian Master Superannuation Guide, 20th edition, today.