Budget introduces the biggest changes to super in 10 years
Key points:
• Tax-free super pension balances capped at $1.6 million
• 30% Contribution tax Income threshold reduced to $250,000
• Other contribution changes
$1.6 Mil cap on Tax Tree Pensions introduced
The key group impacted will be super fund members with large balances.
The amount able to be held in a tax free pension will be limited to $1.6 Million. Any excess balances will need to either remain in accumulation phase or, for existing pensions, be transferred back to accumulation phase as the measures are retrospective
Given that one of the Government’s key aims for superannuation is to reduce the need for the aged pension rather than create tax free income for wealthy it seems a logical move. The impact should not be dramatic as members’ balances over the cap will still receive the concessional, 15% tax rate.
The treasurer told parliament “A balance of $1.6 million can support an income stream in retirement around four times the level of the single age pension,”
Changes to Contributions
30% Contribution tax Income threshold reduced to $250,000
The Budget also lowers the income threshold at which the 30 per cent (rather than 15 per cent) tax rate kicks in on superannuation contributions from $300,000 to $250,000
Annual contribution Caps Reduced
The annual cap on contributions entitled to the concessional tax rates will reduce to $25,000
From July 1, 2017 the Government will allow people with balances under $500k to make “catch-up” concessional super contributions where the $25,000 concessional contribution wasn’t reached in earlier years.
Non-concessional contributions Cap
Non-concessional contributions will also be subject to a lifetime cap of $500,000. This move is not retrospective,
Other Changes
People aged 65-74 will also now be able to make contributions without a work test requirement
A tax offset of up to $500 remains available on concessional superannuation contributions of workers earning less than $37,000,
________________________________________