On Tuesday evening the Treasurer released the 2016 Budget, and superannuation featured prominently in this year’s budget.
We have sourced commentary from Colonial First State, which can be found via the Colonial First State article below, but in general the key matters to consider are the following:
1. For most retirees, the budget has little to no impact on their superannuation or superannuation pensions. However please refer to point 7 below for large pension balances.
2. The Budget provides opportunities for employees to make additional contributions to superannuation without the need to involve their employer – the new system is easier and more flexible than the current arrangements.
3. People aged between ages 65 and 74 will be able to contribute to superannuation, without the need to meet work related tests – again making it easier for people aged between 65 and 74 to make contributions to superannuation.
4. There are some additional benefits for those earning less than $37,000 with the introduction of the Low Income Tax Offset. This is aimed at encouraging those earning less than $37,000 to contribute more to their superannuation account.
5. The current Spouse Super Tax Offset has been relaxed and will now be available to those earning up to $37,000.
6. There have been changes made to the level of contributions we can make to superannuation – both the levels we can contribute and claim as a tax deduction (concessional contributions) and those which we would normally not claim as a tax deduction (non-concessional contributions). This will mean we will need to get serious about superannuation at a younger age – we need to have regular contribution being made earlier in life.
7. The current tax free status of superannuation pensions has been amended and from 1/7/2017 balances over $1.6m for an individual will be taxed at 15%. If you have more than $1.6m in your superannuation account when the time comes to establish the income stream, the excess over $1.6m can be left in the superannuation account where the earnings on the fund are taxed at 15%, with capital gains within the fund being taxed at 10%.
8. There appear to be no changes to the small business rollover exemptions, so if you operate a small business and that business is sold and you want to invest the proceed for your retirement, the rules today are the same as those that applied before the budget.
9. Other changes in the budget include a change in the tax thresholds such that those earning between $80,000 and $87,000 will not be subject to a higher tax rate and this is simply aimed at combating the effect of higher tax rates being applied to wages that have only risen to keep pace with the rising cost of living. Also the debt levy that has been applied to high income earners is expiring in 2017.
10. The change in company tax rates is factored to take place over 10 years, and according to Chris Richardson from Deloittes , who was part of the post budget radio commentary, these tax cuts will result in significant growth in the economy over time. They are a step in the right direction.
For further information on the sourced commentary from this Colonial First State article, please click the link below:
Colonial First State – Your guide to the 2016/17 Federal Budgetnews/2016-budget-update.html
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PETER JORDAN CFP® | MPFP
Senior Financial Strategist
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