A Media Release today by the Federal Government has announced a number of significant changes to the superannuation reforms proposed in the May 2016 Budget.
The major change is the removal of the so-called retrospective $500,000 lifetime cap on non-concessional contributions. The modified superannuation reforms are briefly as follows:
- Non-concessional contributions for those who have superannuation balances less than $1.6 million to be capped at $100,000 per annum (currently $180,000) and the 3 year bring-forward rules to remain for those under the age of 65.
- Individuals with a superannuation balance in excess of $1.6 million will not be permitted to make non-concessional contributions from 1 July 2017.
- Individuals aged 65 to 74 will continue to be required to meet a work test in order to make superannuation contributions – the previous announcements proposed to remove this requirement.
- The proposal to allow individuals with less than $500,000 in superannuation to “catch-up” their concessional superannuation contributions over 5 years if they did not contribute the maximum allowed in an earlier year will be deferred until 1 July 2018.
There have been no changes to the following budget announcements:
- A balance cap of $1.6 million on the total amount of accumulated superannuation an individual can transfer into the tax-free retirement phase to be introduced from 1 July 2017. Members already in the retirement phase with balances above $1.6m will be required to reduce their retirement balance to $1.6 million by 1 July 2017.
- Reducing the annual cap on concessional contributions to $25,000.
- Increase in super contributions tax to 30% on income above a threshold of salary of $250,000 per annum (down from $300,000).
- The tax exemption on earnings of assets supporting Transition to Retirement Income Streams will be removed from 1 July 2017.
- Low Income Super Contribution (LISC) to be retained in the form of Low Income Superannuation Tax Offset (LISTO)
- Extending eligibility for the tax offset for contributions to a low income spouse’s super.
- The anti-detriment provision in respect of death benefits from superannuation to be removed from 1 July 2017.