10 fast facts on super reform
This is a quick snapshot of the proposed superannuation changes recently announced by the Government.
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 per cent or the excess can be taken out.
3. If taxable income is above $250,000 pa, the tax rate is 30 per cent on contributions to a super fund, not the usual 15 per cent.
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 per cent 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 per cent not 0 per cent.
All these changes commence from 1 July 2017 so get cracking!
What are your thoughts on these super reforms? Let us know in the comments below.
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. For more information see Cuffelinks.