Treasurer Scott Morrison has swung the axe to make super fairer.
Generous superannuation tax concessions have long been in the firing line of the Australian public and in Budget 2016/17, Treasurer Scott Morrison has swung the axe to make super fairer.
So, which superannuation changes has Budget 2016/17 delivered for wealthy individuals?
Higher super tax on high earners
As expected, the Government has cut superannuation tax concession thresholds from $300,000 to $250,000, meaning those with combined income and superannuation contributions of over $250,000, will, as of 1 July 2017, pay 30 per cent tax on any superannuation contributions, up from 15 per cent.
Whilst the change will only affect approximately one per cent of Australians, it is expected, in conjunction with the lowering of annual cap on concessional superannuation contributions, to raise around $2.5 billion over the forward estimates period until 2020.
Lifetime cap for non-concessional super contributions
A key change that aims to return superannuation to its original purpose is the implementation of a lifetime cap on non-concessional contributions. This will replace the annual cap of $180,000 per year, or $540,000 every three years for under 65s.
This means that your total non-concessional superannuation contributions cannot exceed $500,000 without incurring penalties.
The lifetime cap will take into account all contributions made on or after 1 July 2007 and will commence at 3 May 7.30pm, and is estimated to earn a revenue of $550 million over the forward estimates period until 2020.
Superannuation transfer balance cap
From 3 May 2016, there will be a $1.6 million limit on the amount that an individual can transfer from superannuation funds into tax-free retirement phase accounts.
The measure will be applied directly to those who enter the retirement phase after today and for those who are already in the retirement phase, they will have until 1 July 2017 to reduce the amount in tax-free retirement phase accounts. Any additional funds over the $1.6 million can be held in superannuation accumulation accounts and taxed at a concessional rate of 15 per cent or in alternative savings accounts or investments.
This measure will affect less than one per cent of superannuation fund members and is expected to deliver revenue of $2 billion over the forward estimates period until 2020.
Improving the integrity of transition to retirement strategies
Transition to retirement strategies should be used to enable individuals approaching retirement to reduce their hours at work, while maintaining a commensurate income through a pension income stream. However, such schemes can be open to manipulation to benefit an individual’s tax position.
In a measure designed to maintain the integrity of the scheme, the Government will remove the tax-exempt status of earnings that support TTR income streams.
This measure will take effect from 1 July 2017 and is expected to deliver revenue of $640 million over the forward estimates period until 2020.
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