Superannuation budget changes
'Reasonable but could have been more flexible’
4 May 2016: The Government’s clear objective for superannuation to provide income in retirement to substitute or supplement pension is absolutely correct, says Deloitte Superannuation leader Russell Mason and Deloitte Private Superannuation Tax Partner and Self Managed Superannuation leader John Randall.
Overall their view is that the changes proposed for superannuation announced by the Treasurer on 3 May 2016 are “Reasonable but could have been more flexible.”
Mason said: “From 1 July 2017 the concessional contributions’ cap will be reduced from $35,000 or $30,000 depending on age, to $25,000 a year if your superannuation balance is less than $500,000. We believe this is a retrograde step.
“Reducing the concessional cap and having a rolling five year catch up is not sufficiently flexible, especially for women and older workers. Deloitte has always stated that having a lifetime cap is a better approach.
“However the extension on the deduction for contributions to those aged up to 75 and for everyone regardless of employment status, is a positive step.”
Cap on pension accounts from 1 July 2017
Randall said: “The introduction of a $1.6 million cap on the amount that can be transferred to tax free pension phase accounts seems reasonable.
“This amount will be indexed in $100k increments. However if you are already in pension phase and you have exceeded this level, you will have to move the excess monies back from your superannuation accounts from 1 July 2017. This will pose administrative challenges for both members and administrators, especially for those individuals with multiple accounts.”
More high income earners attract 30% tax on concessional contributions
Deloitte believes that bringing down the income threshold from $300k to $250k pa and applying an additional 15% tax on contributions is fair. This will affect around 60,000 tax payers.
“The Government could have gone further in helping to address the inequity and we would not have been surprised if it had been reduced to $180k,” said Randall.
Tax treatment of retirement products improved
Mason commended the Government for extending the tax exemption to deferred annuities which will greatly assist in the development of better and more sustainable post retirement products.
He added that there is a lot of detail on transitional arrangements yet to be clarified.
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