Superannuation changes

It appears that elements of the superannuation changes announced by the Turnbull Government in its 2016-2017 Budget are likely to be reviewed after the election, whichever party wins. The changes have not yet been legislated.

To recap, from 7.30 pm (AEST) on 3 May 2016 there is a lifetime non-concessional (after-tax) superannuation contributions cap of $500,000.

From 1 July 2017 the changes include:

  • there will be a balance limit of $1.6 million on the total amount of accumulated superannuation an individual can transfer into the tax-free retirement account. Amounts in a superannuation fund in excess of $1.6million will be able to maintained in an accumulation account (where earnings will be taxed at the existing concessional rate of 15%);
  • the tax exemption on earnings of assets supporting Transition to Retirement Pensions will be removed. All earnings from assets supporting the TTR pension will be taxed at 15%;
  • the income threshold at which an additional contributions tax of 15% will be payable will be lowered to $250,000 (resulting in a total of 30% tax for persons earning income over that amount);
  • the annual cap on concessional superannuation contributions will also be reduced to $25,000 regardless of age (previously $30,000 a year or $35,000 a year for people 50 and over). But there will be no lifetime cap.
  • the current work test before people aged 65 to 74 can make superannuation contributions for their retirement will be removed;
  • individuals with a superannuation balance less than $500,000 may be allowed to make additional concessional contributions where they have not reached their concessional contributions cap in previous years. Unused cap amounts will be carried forward on a rolling basis for a period of 5 consecutive years;
  • all individuals up to age 75 will be allowed to claim an income tax deduction for personal superannuation contributions;
  • the removal of tax barriers to the development of new retirement income products by extending the tax exemption on earnings in the retirement phase to products such as deferred lifetime annuities and group self-annuitisation products.
  • superannuation funds will be prevented from claiming a deduction in respect of certain lump sum death benefits.
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