Superannuation policy up in the air
The main superannuation policy changes proposed by the Coalition going into the recent election are summarised below. The most controversial of these changes is the introduction of a lifetime non-concessional contributions cap of $500,000 that includes any non-concessional contributions made by individuals from 1 July 2007. This has angered many who have made plans for their retirement or are mid-way through completing plans for their retirement who will now be severely disadvantaged if this rule is passed in its current form.
Overall the measures are designed to limit the current excesses in the superannuation system and provide greater assistance to those with lower superannuation balances. The most likely result is that these measures will be passed through parliament in some form based on similar superannuation policies from a number of parties.
At the end of the day there are and will continue to be, significant benefits in utilising superannuation by individuals and these benefits should not be ignored. Once any changes are locked in you should consider your personal circumstances to see how you can make the most of the opportunities that are available.
Summary of main Coalition pre-election superannuation policies:
- Introduction of a lifetime non-concessional contributions cap of $500,000 from budget night that includes any non-concessional contributions from 1 July 2007.
From 1 July 2017:
- The threshold at which high income earners pay additional contributions tax will be lowered to $250,000 (from $300,000).
- The annual cap on concessional superannuation contributions will also be reduced to $25,000 (From $30,000-$35,000 depending on your circumstances).
- The tax exemption on earnings of assets supporting Transition to Retirement Income Streams will be removed.
- The current restrictions on people aged 65 to 74 making superannuation contributions for their retirement will be removed.
- Individuals with a superannuation balance less than $500,000 will be allowed to make additional concessional contributions where they have not reached their concessional contributions cap in previous years.
- All individuals up to age 75 will be allowed to claim an income tax deduction for personal
- superannuation contributions.
- A low income superannuation tax offset (LISTO) will be introduced to reduce tax on superannuation contributions for low income earners.
- The income threshold for the receiving spouse (whether married or de facto) of the low income spouse tax offset will be increased to $37,000.
- A balance cap of $1.6 million on the total amount of accumulated superannuation an individual can transfer into the tax-free retirement phase will be introduced.
- The anti-detriment provision in respect of death benefits from superannuation will be removed.