The federal government says ‘better targeted’ superannuation tax concessions will improve the sustainability and integrity of the system.
The most wealthy Australians will pay more tax on their superannuation while those at the end of the wage scale will pay less, as part of a swathe of superannuation changes announced in tonight’s federal budget.
The measures promise more flexibility and are expected to provide a net gain of $2.9 billion over four years.
Federal Treasurer Scott Morrison said it’s important the superannuation system is focused on sustainably supporting those at risk of being dependent on an age pension in their retirement.
“Together with raising your children and owning your own home, becoming financially independent in retirement is one of life’s great challenges and achievements,” Mr Morrison said.
Wealthy retirees targeted
The tax concessions for the country’s wealthiest will be targeted in the following ways:
- The introduction of a transfer balance cap of $1.6 million on amounts moving into the tax-free retirement phases. Balances will be able to increase above the cap, on account of tax-free earnings, once transferred;
- The 30 per cent tax on concessional contributions to those earning over $250,000 will be extended;
- The annual cap on concessional superannuation contributions will be reduced to $25,000;
- A lifetime non-concessional contributions cap of $500,000 will be established.
The transfer balance cap will be applied to both current retirees and to individuals yet to enter the retirement phase.
“The transfer balance cap, lifetime non-concessional cap and the 30 per cent contributions tax will affect less than one per cent of superannuation fund members,” said Mr Morrison.
Low-income earners, women offered super tax reprieve
People earning less than $37,000 won’t pay more tax on their superannuation than they are on their income. The federal government will introduce a Low Income Superannuation Tax Offset from 1 July 2017. This will allow individuals earning up to $37,000 to receive a refund into their superannuation account of the tax paid on their concessional contributions, up to a cap of $500.
“[The offset] will, in particular, assist around 2 million low income women to build their superannuation savings,” Mr Morrison said.
The federal government has also promised increased flexibility and choice in superannuation to help people save.
- More employees and a wider range of self-employed people will be allowed to claim a tax deduction for personal superannuation contributions.
- Partners will be encouraged to make contributions to their low-income spouses’ superannuation due to an extension of the eligibility for individuals to claim a tax offset.
- People aged between 65 and 74 will now be able to make contributions to their superannuation in a measure aimed at simplifying the superannuation system for older Australians and allowing them to increase their retirement savings;
- People will be able to rollover unused concessional caps, a measure designed to assist women and carers and those with disrupted work arrangements. These individuals will no longer be prevented from making catch-up contributions to their super if in a position to do so. Access to these unused cap amounts will be limited to those individuals with a superannuation balance less than $500,000.