The Government has delivered the 2016/17 Federal Budget with significant changes to superannuation, taxation and retirement.
This Federal Budget Summary was prepared by the ANZ Wealth team on 03 May 2016.
Superannuation
Reduction in concessional contributions cap
1 July 2017
The concessional contributions cap will reduce to $25,000 (from the current $30,000 cap for those under age 50 or $35,000 for age 50 or over).
Concessional contributions for high income earners are subject to an additional 15% tax, known as Division 293 tax. This additional tax applies to ‘low tax contributions’ to the extent that income exceeds $300,000. The $300,000 income threshold will reduce to $250,000.
*Note: Review any salary sacrifice arrangements prior to the commencement of the 2017/18 financial year.
Transition to retirement
Existing superannuation contribution restrictions on individuals aged 65 to 74 will be removed. Individuals under the age of 75 will no longer have to satisfy the work test and will be able to receive contributions from their spouse.
The tax exemption on earnings of assets supporting transition to retirement income streams will be removed.
The ability for individuals to elect for certain super income stream payments to be taxed as lump sums will also be removed.
Low income earners
From the 1 July 2017 the introduction of low income superannuation tax offset (LISTO) will provide a non-refundable tax offset of up to $500 to super funds based on the tax paid on concessional contributions made on behalf of low income earners (those with adjusted taxable income of up to $37,000).
Tax
Starting from the 1 July 2016 the $80,000 income threshold where the 37% tax rate commences will rise to $87,000. This proposal will prevent about 500,000 people from paying the 37% tax rate.
The company tax rate will reduce to 25% over 10 years starting on 1 July 2016.
The tax rate will be lowered to 27.5% from 1 July 2016 for companies with earnings up to $10 million. The $10 million threshold is then progressively increased until all companies pay 27.5% in 2023/24.
Social Security
Social security benefit recipients whose payment is currently reduced due to the receipt of regular gifts from immediate family members may receive an increase in their payment.
Youth Allowance, Austudy and ABSTUDY recipients who control income or assets through a trust or private company may lose or have their payments reduced.
