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Proposed Changes to Superannuation in the 2016 Federal Budget
The government’s delivery of the Federal Budget last 3 May 2016 caused what others refer to as “the biggest shake-up in superannuation since the Howard/Costello changes of the 2006 Budget.”
Among the key super reforms that were proposed were:
- The revision of non-concessional (after-tax) super contributions to a $500,000 lifetime cap from the $180,000 annual cap or the $540,000 3-year “Bring Forward Rule”. This reform is effective from 3 May 2016, 7:30pm and applies to all non-concessional contributions made on or after 1 July 2007.
- The annual cap for concessional contributions to superannuation from $30,000 or $35,000 (for tax payers over 50 years old) is reduced to $25,000 effective 1 July 2017.
- The introduction of a $1.6M transfer balance cap from the superannuation into retirement phase which will take effect also on 1 July 2017. Accumulated savings in the superannuation that exceeds the cap can remain in the super funds and will still earn and be taxed at 15% concessional rate.
- The Work Test where individuals aged 65-74 will only be eligible to make voluntary super contributions when they are employed on a part-time basis and work for at least 40 hours in a period of not more than 30 days is abolished. Along with this policy revision, is the provision of allowing individuals aged 65-74 to receive super contributions from their spouse.
Note that the legislations related to these changes in the superannuation are still being drafted, which means that these revisions are not yet law and will still be up for a normal parliamentary process.
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