BUDGET 2016 – SUPERANNUATION
Goodbye big balance superannuation funds is the message here.
Pension Funds - $1.6M Balance Cap
From 1 July 2017, an individual can only have $1.6M in a pension account (the income is tax free).
All other funds in a superannuation fund will need to be in an accumulation account which the income is taxed at 15%.
Individuals with pension balances above $1.6M will need to either transfer the excess back into accumulation phase or withdraw the excess amount from super by 1 July 2017.
$500,000 Lifetime Non-Concessional Cap (After Tax Contributions)
Effective from 7.30pm (AEST) on 3 May 2016, a lifetime non-concessional contribution limit of $500,000 is introduced. This is the amount you can contribute from your own money without claiming a tax deduction for the contribution.
Prior to this, individuals could contribute $180,000 per year or $540,000 every 3 years. Therefore, a significant change to the amount you can put into super.
The $500,000 cap takes into account contributions from 1 July 2007. If an individual has already gone over the cap prior to Budget night, no action is required, they will not be allowed to contribute any more non-concessional contributions.
Significant changes to Concessional Contributions (tax deductible contributions)
From 1 July 2017, the concessional contributions cap will be reduced to $25,000 per year. This is down from its current cap limits being $30,000 for those aged under 50 and $35,000 aged 50 and over.
From 1 July 2017, individuals with income greater than $250,000 will have a 30% tax on their concessional contributions (as apposed to a 15% tax). The income threshold has reduced from $300,000 currently.
From 1 July 2017, all individuals can claim a tax deduction for personal superannuation contributions, regardless of your circumstance. This area has been quite restrictive in the past.
From 1 July 2017, all individuals under 75 can claim a tax deduction for any personal superannuation contributions. Currently, individuals aged between 65-74 need to pass a work test in order to claim the deduction.
From 1 July 2017, individuals with a superannuation balance of less than $500,000 are allowed to make ‘catch up’ concessional contributions if they haven’t used up their concessional contribution caps in prior income years. The unused amounts will roll forward from 1 July 2017 and will carry forward for a period of five consecutive years.
Transition to Retirement Income Streams
Individuals can roll their superannuation fund into pension phase when they reach preservation age (currently 56), even when they are still working, to access an income stream.
From 1 July 2017, the tax free status of the superannuation pension fund will be removed for the Transition to Retirement Income Streams.
Additionally, tax free lump sum payments under these rules will be removed.