Recap of budget proposals past

The Federal Budget this year was more of a non-event for financial services, despite plenty going on in the industry. However, the 2016 budget included changes to Superannuation which received broad media attention at the time with a few of these changes now in effect and offering opportunities to implement strategies with our clients. So we thought a quick review of Super changes over the last few years would be useful as we lead into financial year end.

Whilst some of the changes were quite technical and complicated, they were primarily designed to limit individuals from accumulating, what some would deem, excessive amounts above their retirement needs within the concessionally taxed environment of Super.

These changes also impact those who were planning to inject the maximum allowable amounts of contributions into Superannuation in the final years leading up to their retirement.

Those who plan in advance and over a longer time period, should still be able to accumulate sufficient Superannuation balances to enjoy the zero tax pension phase.

Super changes to note

Change to annual concessional caps: 
Annual concessional contribution caps were lowered for everyone to $25,000. Previously it was $35,000 for individuals over age 50 and $30,000 for individuals under age 50. (effective 1 July 2017)

Catch up contributions: 
Individuals who do not fully utilise their concessional contributions cap from the 2017/2018 Financial year onwards may be able to make ‘catch-up’ concessional contributions, with any unused portion of the cap being able to be carried forward for a maximum period of 5 years. The ‘catch-up’ contributions are limited to those that have Superannuation balances below $500,000. (effective 1 July 2017) Read more about this here. (effective 1 July 2018)

Topping up retirement accounts will also be made easier, while some couples will be able to even up Super balances under measures proposed in the April 2019 budget.

Age limit increase for spousal contributions:
It is proposed that couples will be able to continue to make spouse contributions until the age of 74, up from 65 now, without having to meet the work test – which requires the saver to work at least 40 hours over 30 consecutive days. Under spouse contributions rules, a saver can claim an 18% tax offset on super contributions of up to $3000 that they make on behalf of a non-working partner. A further $3000 can be injected into the spouse’s account, but with no tax offset. (proposed TBC)

Bring-forward arrangements age limit to be increased:
From July 2020, people who are 65 and 66 years of age will be able to make voluntary pre- and post-tax contributions to super without meeting the work test. They will also be able to make up to three years of non-concessional contributions under the bring-forward rule. Currently this ability is broadly restricted to those under age 65. The annual non-concessional contribution cap is currently set at $100,000. However, the bring-forward arrangements broadly allow eligible Australians to make up to three years’ worth of non-concessional contributions into Super in one year. This enables a maximum non-concessional contribution of up to $300,000 by bringing forward up to the next two financial years’ non-concessional contribution cap. This will only apply to savers with less than $1.6m in Super. (proposed July 2020)

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GENERAL ADVICE WARNING | The information provided in this article is for general information purposes only. It is not intended to be, nor should it be read as personal financial advice. Before acting on any of the information contained in this article you should obtain advice from a specialist advisor, which is appropriate to your specific needs, objectives and financial situation.

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