The Federal Budget includes the following changes to superannuation tax concessions with the aim of supporting people who are vulnerable to reliance on an aged pension during their retirement:
- From 1 July a transfer balance cap of $1.6 million will be introduced for retirement phase superannuation accounts.
- Tax on concessional contributions will be increased to 30 per cent for people earning more than $250 000 annually.
- The cap on annual concessional superannuation contributions will be lowered to $25,000.
- A lifetime non-concessional contributions cap of $500,000 will be introduced.
- A Low Income Superannuation Tax Offset will be introduced for low income earners enabling those earning less than $37,000 per year to receive a refund of the tax paid on their concessional superannuation contribution. This refund will be capped at $500.
According to the Government, the lifetime contributions cap, the transfer balance cap and the increased concessional contributions tax will affect less than one percent of all superannuation contribution members. Additionally, proportionate measures will be applied to those with specific benefit arrangements, including former as well as current politicians and public servants.
The Government will also introduce measures to increase superannuation flexibility and choice including:
- Enabling more employees and self-employed people to claim tax deductions for their personal superannuation contributions.
- Making individuals who contribute to their low-income partners superannuation funds eligible to claim tax offsets for those contributions.
- Removing existing regulations to allow people between the ages of 65- 75 the ability to make contributions to their superannuation.
- Permitting people to roll over concessional caps for up to five years to allow people with intermittent employment to top up their superannuation fund.
According to the Government, these initiatives will result in 96 per cent of Australians with superannuation being either unaffected or better off, and there will be an overall gain of $2.9 billion over the next four years.