Budget Changes to Super – the Good, the Bad, and the Ugly
May 4, 2016
In light of the Federal Government’s recent budget announcement on 3 May 2016, regarding the legislation around superannuation, we have covered the six key changes and how it will impact your retirement.
The Government says it will legislate the objective of superannuation ‘to provide income in retirement to substitute or supplement the Age Pension.’
This objective has guided the other various reforms announced in the budget.
Six key changes summarised:
- From 1 July 2017, all individuals up to age 75, regardless of their employment circumstances, will be able to make superannuation contributions up to the concessional cap. They will be able to claim a tax deduction, although the contribution will be subject to contributions tax within the fund.
- From 1 July 2017 individuals with superannuation balances of $500,000 or less will be able to accrue unused concessional contributions cap amounts. This can be carried forward on a rolling basis for a period of five years.
…the Bad …
- From 1 July 2017 the concessional contribution cap will reduce to $25,000 per year. Currently the concessional contributions cap is $30,000 per year if under age 50 and $35,000 per year if aged 50 and over.
- From 1 July 2017, individuals earning over $250,000 per annum (previously $300,000) will have to pay an additional 15% tax on concessional contributions.
… and the Ugly…
- From 4 May 2016, a $500,000 lifetime cap on non-concessional contributions will be introduced. The cap will take into consideration all non-concessional contributions made since 1 July 2007 and will be CPI indexed in $50,000 increments. The lifetime non-concessional cap will replace the existing non-concessional contributions cap which allows an individual to contribute up to $180,000 per year (or $540,000 under the bring-forward provision of those aged under 65).
- From 1 July 2017, a $1.6 million cap on the total amount of superannuation that can be used to commence a pension will be introduced. For those entering retirement after 1 July 2017, any superannuation in excess of the cap can remain in accumulation, where earnings are taxed at 15%. For those with existing pensions on 1 July 2017, amounts in excess of the cap on this date will need to be rolled back into an accumulation account or withdrawn.
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