Budget 2016/17: Super changes for high income earners

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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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Written by Debbie McTaggart

4 Comments

Total Comments: 4
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    None of the budget reports say how these changes will affect people who were in defined benefit superannuation funds – there are only vague statements about applying a lifetime cap to these funds as well. As we found at the end of 2015, Morrison and Treasury are out to punish all those retired public servants who had no choice in the 1970s and 1980s and had to make compusory personal contributions to defined benefit funds!

    • Profile Photo
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      Seeing as the huge amounts of non concessional contributions never really made any return, not even compounding nor the bank interest rate most years the final lump sum was pretty dismal on these funds.

      I would like to know why there was no real return on capital over four decades or so. It was a unit purchase scheme with all sorts of legislative rules and compulsion.

      There was also a contract signed and a constitution.

      A court challenge to blow the whole scheme open would be interesting.

      If as the propaganda keeps saying these schemes were the very best of schemes then the accumulation schemes must be ripping off billions from savers into the financial industry coffers and be real dogs.

  2. 0
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    does this mean that I can now add to my meagre super contributions, At present I have to work 40 hrs pm before my employer puts in to super and also my self . I work 24hrs a month . I am 74 and although I enjoy working still I wonder if it is worth it.

  3. 0
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    I can’t see how these changes address the unfairness in the super system. The idea of a 15% reduction on the contributor’s top marginal tax rate was very much more sensible. These changes give a miserable contribution to the very low income earners (less than the $500 they were getting) and still overindulges the well-to-do obscenely. Not that there’s any point in low income earners accumulating savings. The government just takes it all back in retirement anyway with a taper rate that’s double to triple the returns one can achieve on investments.

    The $1.6 million cap on transfers to pension fund is good. But instead of screwing battlers who desperately need a small part pension and the accompanying benefits to top up incomes of sometimes as little as half the pension, I would have preferred to see those drawing high incomes in retirement taxed. Why should someone earning more than $70,000 a year in retirement NOT pay tax, when a single-income family on $60,000 a year is slugged more than $4000 a year extra and struggling retirees are being force to drain their personal savings to meet basic living costs? And why on earth are retirees with more than $1.6 million still able to use super to draw huge tax free incomes and keep tax on their obscene surplus to 15%?

    And as for giving tax cuts to high income earners… what a disgrace!


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