May 2016

Posted by Anton Murray Consulting on . Posted in 2016

The speculation about changes to superannuation is over. The Federal Government budget on 3rd May has had a mixed response from the public and industry. So what is going to change and who is going to be affected?

As expected, the main change to superannuation is the reduction to the non-concessional contributions that an individual is able to make. Currently, an individual is able to make an after tax contribution of up to $180,000 a year and the ‘bring forward’ provision allowed that an individual be able to contribute up to $540,000 on a rolling 3 year basis. The budget proposes that this be reduced to a flat $500,000 lifetime cap on non-concessional contributions and abolishing the ‘bring forward’ provision.

Pre-budget, Treasurer Scott Morrison hinted that the ‘transition to retirement‘ strategy may be abolished. Whilst it hasn’t been abolished, earnings from the transition to retirement strategy will no longer be tax free, rather they will incur a 15% tax rate.

One of the biggest changes is the introduction of a $1.6m transfer balance cap, meaning wealthy individuals are unable to accumulate any more than this in the tax free element of retirement phase accounts. Anything over this amount will be taxed at the 15% concessional rate.

Another change is the reduction of the income threshold where contribution tax is raised from 15% to 30%. Currently at $300k, it has been reduced to $250k.

Previously the wealthiest 10% of Australians receive 38% of superannuation tax concessions which is more than the combined benefit of the bottom 70% of income earners. These changes aim to make a more fair and sustainable system for all but Industry Super Australia believes that a a great deal more needs to be done to help as many people as possible reach a comfortable standard of living in retirement.

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