Federal Budget 2016/2017

In this edition:

Welcome

Superannuation - Accumulation Phase Measures

Superannuation - Pension Phase Measures

Individuals & Other Measures

Small Business & Company Measures

Non-concessional contributions lifetime cap of $500,000

One of the biggest measures released by the Government introduces a $500,000 lifetime non-concessional contributions cap. The cap will replace the existing annual non-concessional contributions caps of $180,000 per annum (or $540,000 every 3 years for individuals aged under 65).

The cap is retrospective and will take into account all non-concessional contributions made on or after 1 July 2007 and will commence at 7.30pm (AEST) on 3 May 2016. Contributions made before budget night cannot result in an excess. However, excess contributions made after commencement will need to be removed, otherwise penalty tax will apply.

This lifetime cap will be available to all Australians up to and including the age of 74. For taxpayers aged 75 and more existing rules will remain meaning only mandated contributions can be accepted by their superannuation fund.

Existing arrangements in respect of the capital gains tax cap (set at $1.415 million for 2016-17 financial year) will be retained. This means that small business taxpayers eligible for CGT concessions can place proceeds from realising their business into the superannuation system.

Concessional contributions cap cut to $25,000 

From 1 July 2017 the annual cap on concessional superannuation contributions will be reduced to $25,000. There will be one cap for all taxpayers irrespective of their age. The concessional contributions cap is currently set for the 2015–2016 and 2016–2017 income years at $30,000 for those under age 49 on 30 June of the previous income year (or $35,000 for those aged 49 or over on 30 June of the previous income year).

Catch-up for concessional superannuation contributions 

Individuals with a superannuation balance less than $500,000 will be allowed to make additional concessional contributions for "unused cap amounts" where they have not reached the concessional contributions cap in previous years. Unused cap amounts will be carried forward on a rolling basis for five consecutive years. Only unused amounts accrued from 1 July 2017 will be available to carry forward. This will also apply to members of defined benefit schemes.

Superannuation contributions tax (extra 15%) for incomes over $250,001 – Division 293

Currently, Division 293 imposes an additional tax of 15% on concessional contributions where an individual's total 'income' exceeds $300,000.

Concessional contributions subject to tax under Division 293 are effectively taxed at 30%.

From 1 July 2017, the government will lower the Division 293 'income' threshold from $300,000 to $250,000.

Contribution rules changes for those aged 65 to 74 

From 1 July 2017 people between the age of 65 and 74 will no longer have to satisfy a work test and will be able to receive spouse contributions. This is intended to simplify the superannuation system for older Australians and allow them to increase their retirement savings. 

Personal superannuation contributions will be tax deductible
From 1 July 2017, all individuals up to age 75 will be able to claim an income tax deduction for personal superannuation contributions. This allows all individuals regardless of their employment circumstances to make concessional superannuation contributions up to the concessional cap ($25,000). This will benefit individuals who are partially self-employed and partially wage and salary earners and individuals whose employers do not offer salary sacrifice arrangements. 

Improving superannuation balances of low income spouses
From 1 July 2017, the Government will increase access to the low income spouse superannuation tax offset by raising the income threshold for the low income spouse from $10,800 to $37,000. New Low Income Superannuation Tax Offset (LISTO) A low income superannuation tax offset (LISTO) will be introduced to reduce tax on superannuation contributions for low income earners from 1 July 2017. The LISTO is a non-refundable tax offset for superannuation funds, based on the tax paid on concessional contributions made on behalf of low income earners. The offset will be capped at $500.

The LISTO will apply to fund members with adjusted taxable income up to $37,000 that have had a concessional contribution made on their behalf.

If you have any questions about how these measures may impact your business, please contact the team at Goodwin Chivas & Co.