Sweeping superannuation changes that will significantly impact industry and all superannuants have been announced by the Federal Government in its 2016/2017 Budget under the mantra of a new purpose for superannuation – "to provide income in retirement to substitute or supplement the Age Pension".
Industry reaction has been swift and relatively consistent. The reforms are the most significant we have seen in terms of superannuation and tax since the so-called Simpler Super changes in 2007.
Despite the Government's pre-election commitment to not introduce any adverse changes to superannuation in this term of Parliament, there are many who will be disappointed with the Government's cuts to the concessional contributions cap and the introduction of a lifetime cap for non-concessional contributions.
Service providers and industry participants will be justifiably concerned with the complexity associated with measures seeking to limit retirement balances in super to $1.6 million. Coupled with other aspects of the proposed superannuation reforms, these measures will mean investors may need to look elsewhere to house their money.
It remains to be seen what impact the proposals will have on the Government's retirement income strategy and reliance on the Age Pension. What is certain is that the reform cycle for superannuation will continue in earnest and confidence in the system will continue to dive.
The table below (and attached by clicking download at the top of this article) provides a high level summary of the major superannuation and regulator reforms announced in the Budget. If you have any queries about how these changes impact you, please contact a member of our team.
SNAPSHOT
Amendment | Need to know | |
What's new: | ||
1 |
Maximum $1.6 million balance for retirement accounts from 1 July
2017 (ie those in the payment phase cycle). |
|
2 |
Lifetime cap of $500,000 on non-concessional contributions. The
cap will commence from 7.30 pm on 3 May 2016. |
|
3 |
"Catch up" for account balances less than $500,000
from 1 July 2017. |
|
4 |
Tax exemption extended for retirement income products. |
|
What's being tinkered with: | ||
5 |
Annual cap of $25,000 on concessional contributions from 1 July
2017. |
|
6 |
Division 293 tax commences from $250,000 threshold. |
|
7 |
Changed tax treatment for transition to retirement pensions from
1 July 2017. |
|
8 |
Low income super tax offset to be introduced. Read more: Budget Paper No 2 at page 28 Superannuation fact sheet 6 |
|
9 |
Low income spouse super tax offset to be extended. Read more: Budget Paper No 2 at page 25 Superannuation fact sheet 10 |
|
10 |
Work test for contributions to be removed for age 65 to 74. Read more: Budget Paper No 2 at pages 24-25 Treasurer's press release, 3 May 2016 Budget Superannuation Fact Sheet 9 |
|
11 |
Tax deductions for personal superannuation contributions
extended from 1 July 2017. |
|
12 |
Anti-detriment deduction to be removed for super benefits from 1 July 2017. Read more: Budget Paper No 2 at page 29 Treasurer's press release, 3 May 2016 |
|
New regulator funding – who gets what? | ||
13 |
APRA. |
|
14 |
ASIC. |
|
15 |
Superannuation Complaints Tribunal (previously announced on 20
April 2016). |
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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