Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 174

10 quick points on super reform for dummies

  •   22 September 2016
  • 2
  •      
  •   

This is a quick snapshot of the proposed superannuation changes announced by the Government (as at Friday 16 September 2016, that is).

  1. The Government is legislating an objective of superannuation against which all changes will be measured. Broadly, the primary objective of super will be 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.
  2. 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.
  3. If taxable income is above $250,000 pa, the tax rate is 30% on contributions to a super fund, not the usual 15%.
  4. 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.
  5. If income is less than $37,000 pa the Government will refund the contribution tax to the fund.
  6. Employees can receive a deduction for up to $25,000 pa of contributions less what their employer has contributed.
  7. 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.
  8. Income on deferred annuities will be tax exempt.
  9. Extra payments made by funds on the death of a member will not be tax deductible.
  10. Fund income supporting a pension while a person is working will be taxable at 15% not 0%.

All these changes commence from 1 July 2017 so get cracking!

 

Gordon Mackenzie is a Senior Lecturer in taxation and superannuation law at the Australian School of Business, University of New South Wales. This article is a brief summary of the major points, it does not consider the needs of any individual and does not summarise all aspects of the proposals, which have yet to be legislated.

 

2 Comments
Ben
September 29, 2016

Yes this is not smart in my opinion, lowering the amount to $25,000, when interest rates are so low and likely future returns even on the stock market will be low. Only public servants with their assured tax payer funded defined pension schemes would let this get proposed. Ivory towers in Canberra!

The elderly are usually advised to keep a solid proportion of their income producing assets in fixed interest not shares/stocks. With Aust 10 year Gov bond under 2% that means $500,000 will yield $10,000 annually. This will likely result in more people needing more pensions from the taxpayer not less.

If people put more into shares, and there's a significant crash/drop what will this mean? How many could cash out at the worst time?

Meddling with the world famous super scheme Australia introduced is unwise. Anyway in our view Aust Gov.s in the future will not have enough money as in other welfare dependent and demographically challenged developed countries and the private Super monies will be even more attractive for treasury to 'raise money' from. Beware.

PPayne
September 22, 2016

6.Employees can receive a deduction for up to $25,000 pa of contributions less what their employer has contributed

Can someone speak on our behalf.
If you are over 50 years the limit for Concessional Contributions was $35000. (This is excluding the 9.5% employers super SGC guarantee). Please can this be re-instated. It has been reduced to $25000 for everyone (including >50 years).
This is the time when you can build a bit more I your super and it is not fair to target this group.

 

Leave a Comment:

     

RELATED ARTICLES

'Rorts and rip-offs’ prevention in super legislation

What might the Tax White Paper say on imputation and CGT?

Make sure going overseas does not spoil your SMSF

banner

Most viewed in recent weeks

House prices surge but falls are common and coming

We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.

Survey responses on pension eligibility for wealthy homeowners

The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?

100 Aussies: five charts on who earns, pays and owns

Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.

Three good comments from the pension asset test article

With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.

The sorry saga of housing affordability and ownership

It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.

Two strong themes and companies that will benefit

There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.

Latest Updates

Retirement

Stop treating the family home as a retirement sacred cow

The way home ownership relates to retirement income is rated a 'D', as in Distortion, Decumulation and Denial. For many, their home is their largest asset but it's least likely to be used for retirement income.

Property

Hey boomer, first home buyers and all the fuss

What is APRA worried about? Most mortgagees can easily absorb increases in interest rates without posing a systemic threat to the banking system. Housing lending is a relatively risk-free activity for banks.

Property

Residential Property Survey Q3 2021

Housing market sentiment has eased from record highs and confidence has ticked down as house price rises slow. Construction costs overtook lack of development sites as the biggest impediment for new housing.

Investment strategies

Personal finance is 80% personal and 20% finance

Understanding your own biases and behaviours is even more important than learning about markets. Overcome four major cognitive biases that may be sabotaging your investing and recognise them in others.

Where do stockmarket returns come from over time?

Cash flow statements differ from income statements and balance sheets, and every company must balance payments to investors versus investing into the business. Cash flows drive the value of the business.

Fixed interest

How to invest in the ‘reopening of Australia’ in bonds

As Sydney and Melbourne emerge from lockdown, there are some reopening trades in the Australian credit market which 'sophisticated' investors should consider as part of their fixed income portfolios.

Shares

10 trends reshaping the future of emerging markets

Demand for air travel, China’s growing middle-class population, Brazil’s digital payments take-up, Indian IPOs, and increased urbanisation are just some of the trends being seen in emerging economies.

Sponsors

Alliances

© 2021 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.