In the Federal budget handed down in May 2016, the government heralded significant changes to superannuation that will come into effect from 1 July 2017.
Although the government is still to finalise the exact details, it is a good idea to plan ahead, and to be aware of the major changes that will apply from next year.
Another of the Government’s plans is to increase access to the Low Income Spouse superannuation tax offset by increasing the income threshold for the low income spouse from $10,800 to $37,000.
If your partner earns less than $37,000 pa, The Low Income Spouse tax offset allows for up to $540 for the contributing spouse. The offset reduces as your partner’s income increases and is completely phased out at $40,000 pa.
Also from July next year the concessional (before-tax) contributions cap will be reduced to $25,000. The current cap is $30,000, or $35,000 for people 50 and over. The current caps are indexed, but from 1 July 2017 this will not be the case.
In other changes the government has proposed, people with a balance in superannuation of under $500,000 will be allowed to make ‘catch-up’ payments or contributions of unused caps over a 5 year period.
Clearly, it is going to be harder for people to deposit money into superannuation when the new rules come into play. From 1 July 2017, the government will introduce a $1.6 million limit on the amount an individual can transfer from superannuation funds into a tax-free retirement account. This new measure will directly affect all those who entered retirement phase after Budget night (3 May 2016).
For retirees, this means they will have until 1 July 2017 to reduce the amount in tax-free retirement accounts to $1.6 million.
Even though these budget measures will increase tax revenue, they also allow greater flexibility for people with larger superannuation balances to make them last longer.
If you would like more information about these changes and others that may affect you, your superannuation or plans for retirement, please don’t hesitate to give us a call for a chat.
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