The 2016 Australian Government Budget handed down in May issued the most changes to pensions and superannuation seen in years, as part of the broader reform agenda to improve the sustainability and equity of our super system.
Some of the key elements are outlined here, from 2 main tranches of draft legislation in September –
Clearer Definition of the Objective of Super
“To provide income in retirement to substitute or supplement the Age Pension” and includes smoothing over an individual’s life, management of the risks of retirement, alleviate fiscal pressures on Government, and simplicity and efficiency.
Entitled to tax offset up to max $540 per year for contributions to their spouse’s super whose assessable income is less than $40,000 (currently $13,800).
Reduced tax on contributions for low income earners – new LISTO
Those on income less than $37,000 will have up to $500 paid to cover the 15% employer/concessional contributions tax paid by the super fund.
Pension “Total Balance” cap of $1.6 Million
This is the maximum amount that can be transferred into a Tax-Free income stream for use when eligible for retirement, as from 30 June 2017, and no further contributions will generally be possible to that portion. Super in excess will remain in accumulation phase, at 15% tax.
Concessional Contribution Caps
From 1 July 2017 the max will be $25,000 down from $30,000 and $35,000 for over 50’s, currently.
This is after tax contributions from personal funds – the lower max will be $100,000 for 1 July 2017 with a bring-forward rule of 3 years at one time [$300,000) at once if under 65 and TOTAL super balance is under $1.6 million.
There are also catch-up provisions for those who have not had the full concessional contributions made say due to interrupted work patterns.
Interested to know what self-managed super (SMSF) is all about, and if it is for you? See the slides SMSF Roadmap Overview.
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