As mentioned in the April 2016 newsletter, the Federal Government proposed to make a number of changes to Superannuation in the 2016/17 Budget. After negotiations with Labor, and taking into account the concerns of a number of backbench party members, the Government has now come to a conclusion as to the nature of these changes. Some include:
- Non-Concessional Cap: In the May 2016 Budget, Treasurer Scott Morrison proposed a lifetime $500,000 cap for all non-concessional contributions, taking into account contributions received from 1st May 2007 to 3rd May 2016 (Budget Night). This has now been changed to a yearly cap of $100,000 with the option to bring forward 3 years worth of contributions as we have had previously. However, individuals with balances in Super of more than $1.6m will not be able to make non-concessional contributions after 1st July 2017.
- Work Test: Currently there is a requirement for members aged between 65 and 74 to satisfy a work test in order to make super contributions. It was proposed in the Budget to remove this test; however the Government has kept the current rules in place, meaning that there is no change to the current regime.
Some of the proposals in the Budget appear to have been agreed to, including:
- Removal of tax exemption for Transition to Retirement pensions, as well as the refusal to allow lump sum withdrawals to be classified as pension withdrawals.
- Removal of ability to make anti-detriment payments on the death of members
- Changes to the annual concessional caps to $25,000 from 1st July 2017
- $1.6m cap for pension accounts from 1st July 2017
- Lowering of the Division 293 threshold to $250,000
- Allowing members with a balance below $500,000 to make catch-up concessional contributions subject to a 5 year rolling cap from 1st July 2018 (please note, this is a delay of 12 months from the original commencement date)
- Increased access to spouse contribution rebates and tax offsets for low income earners.
It should be noted that these changes are not current legislation, but it is extremely likely that they will pass through as discussed above.
If you would like to have further detail regarding the above points contact your LBW Chartered Accountants representative.