10 QUICK POINTS ON THE LATEST ROUNDS OF SUPER REFORMS

On 15th September 2016, the Treasurer, Scott Morrison, announced another round of proposed changes to superannuation in Australia in an effort to mitigate some of the worst elements of the unpopular package he introduced in the May 2016 Budget. All of these alterations to super cannot come into effect until they are passed through the Parliament, so may be subject to even more changes in the near future. But, to understand where we all currently sit on this matter, we provide a quick snapshot of the latest round of superannuation proposals (through the good graces of Gordon Mackenzie of the Australian School of Business, UNSW):

  1. Income on account balances paying a pension up to maximum of $1.6 million will be tax-exempt. Any income from assets above that will be taxed in a fund at 15% or the excess can be taken out.
  2. If taxable income is above $250,000 pa, the tax rate is 30% on contributions to a super fund, not the usual 15%.
  3. Non concessional contributions will be capped at $100,000 pa or $300,000 over any three-year period before age 65, and once there is $1.6 million in a fund, no more non-concessional contributions can be made.
  4. If income is less than $37,000 pa the Government will refund the contribution tax to the fund.
  5. Employees can receive a deduction for up to $25,000 pa of contributions less what their employer has contributed.
  6. One spouse can contribute up to $3000 to the other spouse’s super account whose income is less than $40,000, and the first spouse gets an 18% tax offset on what they have contributed.
  7. Income on deferred annuities will be tax exempt.
  8. Extra payments made by funds on the death of a member will not be tax deductible.
  9. Fund income supporting a pension while a person is working will be taxable at 15% not 0% .
  10. The Government is legislating an objective of superannuation against which all changes will be measured. Broadly, the primary objective of super is to supplement or replace the age pension. This objective has some problems, including that super funds currently pay out on events unrelated to pensions, they pay out lump sums and they pay money to beneficiaries other than the superannuation fund member.

It is proposed that all these changes begin from 1 July 2017.

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This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs.
Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.
Odyssey Financial Management is an authorised representative of Total Financial Solutions Australia Limited.