Treasurer Scott Morrison has handed down his first Federal Budget — the Coalition Government’s third. The winners are low and middle income earners and small business owners. There are significant changes to superannuation that could warrant further discussion with JBS.
Please view the video to watch a brief summary of the Budget proposals.
The government lead last night with the words ‘jobs and growth’, and wanted these to be the key takeout of their budget, but from our perspective, the changes to superannuation are the most significant we have seen in a number of years.
Treasurer Scott Morrison has shaken up the superannuation system, with sweeping changes to concessional & non-concessional contributions, TTR arrangements, lifetime caps & tax offsets.
The following provides a summary of the main proposals announced in the 2016 Budget:
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 2017
– The annual cap on concessional (pre-tax) super contributions will reduce to $25,000, regardless of age.
– Concessional super contributions may exceed the annual cap if certain conditions are met.
– 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.
– Allowing carry-forward of unused concessional caps over a 5 year period for those with balances under $500,000
– A lifetime limit of $1.6m will be placed on the amount of superannuation that can be transferred to start pensions.
– Earnings on investments held in ‘transition to retirement’ pensions will be taxed at 15% (currently 0%).
These changes are significant, wide ranging & will have a huge effect on the ability of many Australians to build their superannuation.
The changes will result in a larger amount of ‘non-superannuation’ assets being used to fund retirement and will affect many existing superannuation & retirement strategies.
JBS View and Planning opportunities
The one guarantee in our industry is change and once again this reiterates the importance of obtaining ongoing advice and continuing to review your situation to ensure that you are structured appropriately to ensure that you are positioned well for the future. Here are some of our initial thoughts and tips:
– Make extra concessional contributions before 1 July 2017
– Consider the benefits of spouse contributions and super splitting where applicable.
– Consider the effects of holding insurance inside and outside of super.
– Consider the long term benefits of paying the associated tax and exceeding the lifetime cap.
As always prior to making any significant changes, please give Jenny, Warren or Glenn a call to discuss how you can implement some strategies to ensure you are well positioned for the future.
Please click here for a full detailed report on the above and other changes as announced.
Please Note: The measures outlined in the Federal Budget are proposals only and may or may not be made law and will depend on the outcome of the upcoming election.