The Federal Government has both given and taken from the superannuation industry, reducing the concessional contributions caps to $25,000 at the same time as implementing an immediate lifetime non-concessional contributions cap of $500,000 and restoring the Low Income Superannuation Contribution (LISC).
As expected, the Government has also targeted the super tax concessions applying to high income earners.
The Federal Treasurer, Scott Morrison, fulfilled the expectations of many senior superannuation industry executives by retargeting the superannuation tax concessions away from upper income earners but, at the same, caused disappointment via the concessional contributions cap decision.
In doing so, the Treasurer claimed he was protecting the overall architecture of the superannuation by also retaining the tax-free status of retirement accounts.
The Government has timed the reduced tax concessions for high income earners and the wealth for 1 July, next Year, after which time it will implement:
- a transfer balance cap of $1.6 million on amounts moving into the tax-free retirement phase, with balances able to increase above this cap, on account of tax free earnings, once transferred;
- an extension of the 30 per cent tax on concessional contributions to those earning over $250,000;
- a reduction in the annual cap on concessional superannuation contributions to $25,000; and
- the immediate establishment of a lifetime non-concessional contributions cap of $500,000.
Morrison said a balance of $1.6 million could support an income stream in retirement around four times the level of the single Age Pension and a transfer balance cap would be applied to both current retirees and to individuals yet to enter their retirement phase.
“The transfer balance cap, lifetime non-concessional cap and the 30 per cent contributions tax for those on high incomes will each affect less than one per cent of superannuation fund members,” he said.
“A concessional contributions cap of $25,000 per annum will affect just three per cent of superannuation fund members, particularly those who pay the top rate of income tax.”
The Treasurer said commensurate measures would also be applied to high income earners with defined benefit arrangements, including current and former politicians and public servants.
“In addition to tightening access to tax concessions, the Government will also be introducing a Low Income Superannuation Tax Offset from 1 July 2017, to ensure that people earning less than $37,000 are not paying more tax on their superannuation than they are on their income,” he said
“This will effectively allow individuals with an adjusted taxable income of up to $37,000 to receive a refund into their superannuation account of the tax paid on their concessional contributions, up to a cap of $500. Additionally, the Treasurer said other Budget measures would assist workers by:
- allowing more employees and a wider range of self-employed people to claim a tax deduction for personal superannuation contributions;
- encouraging partners to make contributions to their low-income spouses’ superannuation by extending the eligibility for individuals to claim a tax offset for these contributions;
- removing the current regulations that restrict people aged between 65 and 75 from making contributions to their superannuation. This will assist those who are no longer working to top up their retirement savings from sources not necessarily available to them before retirement; and
- allowing people to rollover unused concessional caps so those with interrupted work arrangements – predominantly women and carers – are not prevented from making catch-up contributions to their super, if they are in a position to do so.
“Ninety-six per cent of Australians with super will be unaffected by or be better off as a result of the superannuation changes we have announced tonight,” he said. “The net impact of changes to superannuation announced in these measures will be a net gain of $2.9 billion over the next four years.”
