In the 2016 Federal Budget, the Turnbull Government decided to focus in on superannuation through their Superannuation Reform Package with the aim of fostering fairness, sustainability, flexibility, and integrity in the retirement savings environment.
Many people stand to benefit from these changes, but some higher income earners will lose out. As most of these changes start from 1 July this year, there’s still a window of opportunity between now and June to take full advantage of the current system.
The new taxation and superannuation bills passed through the House of Representatives and Senate can be broadly characterised into three main groups:
Firstly, measures impacting on higher income earners and those with a capacity to make additional contributions
Secondly, ‘integrity’ measures
And lastly, measures supporting low income earners and providing more flexible contributions arrangements
There are really only two measures that were proposed at Budget night, that have been dropped and not included in the new legislation. The $500,000 lifetime non-concessional contributions cap has been dropped and the work test will remain for those aged over 65.
Who Will Be Affected?
With regards to the changes, possibly the main question on your mind is where you, like many other Australians, sit and what you can do between now and 30 June.
|Estimates of the number of people affected by the superannuation measures|
|MEASURE||ESTIMATED NUMBER OF PEOPLE|
|$1.6 million transfer balance cap||<160,000|
|$100,000 cap on non-concessional contributions||<160,000|
|$25,000 concessional contributions cap and lowering threshold of $250,000 for high income earners additional 15% contributions tax||560,000|
|Remove tax exempt status of income from assets supporting transition to retirement (TTR) income streams||110,000|
|Low Income Superannuation tax offset||3.3 million|
|Unused concessional cap carry forward||220,000|
|Tax offsets for spouse contributions||5,000|
|Deducting personal contributions||800,00|
|Reference: Australian Government (2016). Bills Digest no. 45, 2016–17. Retrieved from: http://parlinfo.aph.gov.au/parlInfo/download/legislation/billsdgs/4951864/upload_binary/4951864.pdf|
Although the changes may affect you in some way, it is important to note two things: superannuation is still one of the most tax-effective investments when building your wealth for retirement and there is still time to implement strategies prior to the 1 July 2017 deadlines on many of the abovementioned taxation and superannuation measures, especially regarding topping up your super via taking advantage of the higher limits that currently apply for concessional and non-concessional contributions.
Moving forward, planning and careful consideration of your current and proposed financial situation are key and if you need assistance or help understanding these changes don’t hesitate to get in contact with us.