Last night the Treasurer Scott Morrison handed down his first Federal Budget. The winners are low and middle income earners and small business owners. There are significant proposed changes to superannuation that could warrant further discussion and review of your existing strategy.
For those who would like more detail and an explanation of what what the relevant measures mean for you, please follow this link to a great summary from the BT Financial Group.
For those who would like to watch a video summary by Simone Collins, Senior Manager, Product Technical, from the BT Financial Group, please follow this link.
As always, please do not hesitate to contact us to arrange a time to discuss how you may be personally impacted by this year’s Federal Budget – We are here to help you achieve your goals and make smart decisions with your money!
Date of effect: Immediate
- A lifetime cap on non-concessional (after-tax) superannuation contributions of $500,000 will apply from 7.30 pm on 3 May 2016.
Date of effect: 1 July 2016
- The income tax threshold at which the 37% tax applies will increase to $87,001 pa, from the current $80,001 pa.
- The tax rate that applies to small business companies will reduce to 27.5% for businesses with a turnover up to $10 million in 2016/17.
Further tax concessions will apply in future financial years.
Date of effect: 1 July 2017
- The annual cap on concessional (pre-tax) super contributions will reduce to $25,000, regardless of age. Current concessional contribution limits of up to $35,000 (for those who are eligible) will still apply until then.
- Concessional super contributions may exceed the annual cap if certain conditions are met. This will help people with super balances of less than $500k potentially catch-up on their concessional contributions, particularly if they have had a break from the workforce (e.g. women who have been on maternity leave).
- Those aged between 65 and 74 will be able to make super contributions regardless of whether they work or not.
- Tax deductions will be able to be claimed for personal contributions regardless of employment status.
- A lifetime limit of $1.6m will be placed on the amount of superannuation that can be transferred to start pensions (It is unclear what will happen to people’s accounts where this has already occurred).
- Earnings on investments held in ‘transition to retirement’ pensions will be taxed at 15% (currently 0%).
Measures not announced or affected
Negative gearing, Age pension and other social security benefits