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10 quick points on super reform for dummies

  •   22 September 2016
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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.

 

  •   22 September 2016
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2 Comments
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.

Ben
September 28, 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.

 

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