The 2016/17 Federal Budget contained some major superannuation changes. Some highlights are below, but bear in mind these proposals still need to be passed into legislation.
Contribution cap changes
From 7.30pm (AEST) on 3 May 2016, a lifetime non-concessional cap of $500,000 will replace the current annual caps. This cap includes all non-concessional contributions made since 1 July 2007 and any excess contributions will need to be refunded or a penalty tax of up to 49% may apply.
If you have already contributed more than $500,000 of non-concessional contributions between 1 July 2007 and budget night, no excess will apply however any future contributions from budget night may exceed the cap.
Concessional contributions caps have also been reduced to $25,000 per year for all ages from 1 July 2017. If your superannuation balance is less than $500,000, you can carry forward any unused cap amounts over a rolling five year period. A 30% tax on concessional contributions will now apply to those on $250,000 p.a. income.
$1.6million cap on super pensions
From 1 July 2017, a cap of $1.6 million will be placed on the amount of superannuation that you can transfer to a superannuation pension. Any balance in excess of this must remain in an accumulation account where earnings are taxed at a maximum of 15%. Those who already exceed this cap will be required to transfer the excess amount back to superannuation by 1 July 2017.
Other highlights include:
- Abolition of the work test for those up to age 75 who want to make super contributions.
- The tax exemption on TTR pension earnings will be removed from 1 July 2017 – earnings to be taxed at 15%.
- From 1 July 2017, there will be no employment restriction placed on who can claim a tax deduction for personal superannuation contributions.
- The $540 p.a. tax offset on spouse contributions has been opened up with proposed increases to the threshold to $37,000 and the age limit to 75 starting 1 July 2017.
- From 1 July 2017 a low income concessional contribution tax offset of up to $500 is available if your adjusted taxable income is less than $37,000.
Your adviser can provide more details on how these changes may affect you.