Government delivers significant changes to superannuation in its 2016-17 Federal Budget
May 27, 2016
A reduction in concessional contribution caps, the lowering of the Division 293 tax threshold, capping tax-free assets in retirement and a lifetime limit for non-concessional contributions are just some of the changes that were in the Budget announcements this year to impact superannuation. These changes may impact your SMSF and retirement planning and require you to reassess your existing strategies or contemplate new ones.
The key changes proposed for superannuation:
- Introducing a lifetime cap for non-concessional contributions
- Lowering the concessional contribution cap to $25,000 for all individuals
- Lowering the threshold of Division 293 tax
- Introducing a $1.6 million superannuation transfer balance cap
- Removing the tax-free treatment of assets supporting transition to retirement income streams
There are a number of other proposed superannuation changes that may affect you from 1 July 2017. These changes are:
- Allowing catch-up concessional contributions — people who have balances under $500,000 will be able to carry forward any unused concessional contributions caps on a rolling 5 year basis.
- Tax deductions for personal superannuation contributions — all Australians under the age of 75 will be able to claim an income tax deduction for personal contributions made to their superannuation funds. Currently, this type of deductible contribution is generally available only to self-employed people.
- Harmonising contribution rules for those aged 65 to 74 — people will no longer have to meet the work test before making concessional and non-concessional contributions to their super fund if they are aged from 65 to 74 (including making contributions for a spouse aged under 75).
- Improving superannuation balances of low income spouses — the eligibility rules for low income spouse superannuation tax offset will be extended by raising the threshold from $10,800 to $37,000.
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