Posted on 4 May '16 by , under General News.
The Budget has introduced a series of changes to superannuation tax arrangements that are intended to align superannuation with the purpose of providing income in retirement.
The key elements of the superannuation changes include:
Introducing a transfer balance cap
There will be a $1.6 million superannuation transfer balance cap on the total amount of super that individuals can transfer into retirement phase accounts. While this limits taxpayer support for tax-free retirement phase accounts, it does not restrict the savings that can accumulate outside of superannuation.
Increasing the 15 per cent tax rate on concessional contributions
Those with combined incomes and super contributions greater than $250,000 will now be required to pay 30 per cent tax on their concessional contributions. This extends the current treatment of people with combined incomes and superannuation contributions over $300,000. Superannuation fund members who are affected will still have significant incentives to save for their retirement alongside other provisions.
Lowering the superannuation concessional contributions cap
The superannuation concessional contributions cap will be lowered to $25,000 per annum to provide more flexibility and accommodate modern working arrangements. Reducing the caps will only affect around three per cent of superannuation fund members, who will still be able to make enough contributions during their working life to be self-sufficient in retirement.
Introducing a $500,000 lifetime cap for non-concessional contributions
The lifetime cap will limit the extent individuals can use superannuation for tax minimisation and estate planning. Less than one per cent of Australian superannuation fund members have made contributions above this cap since 2007.
Introducing the Low Income Superannuation Tax Offset
The Low Income Superannuation Tax Offset (LISTO) will replace the Low Income Superannuation Contribution when it expires on 30 June 2017 to continue to support the accumulation of superannuation for low-income earners. The LISTO will allow individuals with an adjusted taxable income of $37,000 or less to receive a refund of the tax paid on their concessional contributions, up to a cap of $500. The LISTO will, in particular, assist women to build their superannuation savings.