Government Passes Changes to the Superannuation System

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The changes to the superannuation system have passed through Parliament today, following compromises reached, after the initial announcement in the 2015-16 Budget.

Changes include:

  • A $1.6 million cap on the amount of tax free savings a member can have in retirement from 1 July 2017. (The cap will be indexed and will rise each year in line with CPI);
  • After tax contributions will be capped at $100,000 per year;
  • The primary objective of the superannuation system is to be enshrined in legislation as “to provide income in retirement to substitute or supplement the Age Pension”;
  • From 1 July 2017, the threshold at which income earners pay an additional contributions tax will be lowered from $300,000 to $250,000;
  • The annual cap on concessional (before-tax) contributions will be lowered  to $25,000 from 1 July 2017 (previously $30,000 for those aged less than 49, and $35,000 for those aged over 49);
  • From 1 July 2017, the Government will introduce the Low Income Superannuation Tax Offset (LISTO) replacing the previous scheme known as the Low Income Superannuation Contribution (LISC). The new scheme will refund the tax paid on concessional contributions up to a cap of $500 for individuals with a taxable income up to $37,000;
  • From 1 July 2017, the Government will allow all members under the age of 65, and those aged between 65 and 74 who meet the work test, to claim a tax deduction up to the concessional contributions cap;
  • From 1 July 2018, new catch up contributions will be allowed for those with a total super balance of less than $500,000 to carry forward unused concessional cap space (for up to 5 years);
  • The spouse tax offset (currently $540) will be extended to partners who are earning up to $40,000 (currently $10,800);
  • From 1 July 2017, the anti-detriment rule will be removed which previously allowed superannuation funds to claim a tax deduction for a proportion of the death benefits paid to eligible dependants (effectively the 15% contributions tax paid by the deceased during their lifetime);

Treasurer, the Hon Scott Morrison MP, issued a joint media release, while stating: “This represents the most significant change to protect the flexibility and ensure the sustainability of superannuation in more than a decade.

The changes are forecast to save the Federal Budget $3 billion over 4 years.

 

 

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