Superannuation got a big shake-up in the 2016 federal budget, with Treasurer Scott Morrison taking aim at high-income earners and extending some new benefits to low-income earners, women and older people in the workforce.
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This is the amount of concessionally taxed super you can contribute to your fund each year through salary sacrifice and the 9.5 per cent super guarantee payments made by your employer. It has been reduced to $25,000 a year from $30,000 or $35,000 for people over 50 from July 1 2017.
In the past, any of the concessional cap not used in a particular year was lost.
But with the new system, any unused concessions can be rolled forward for up to five years and used if extra funds are available for those with less than $500,000 in their fund.
This means people will not have to set up formal salary sacrifice provisions each year; rather they can decide at the end of each year what they can afford to contribute.
It also allows those out of the workforce for periods of time to make top-up payments when they have the cash.
This measure should particularly help women periodically leaving the workforce for child or other caring duties.
These after-tax contributions to super have been significantly curtailed.
Until now, those with the cash could make contributions of $180,000 a year, or $540,000 once every three years, to their super funds.
From budget night this figure has been slashed to $500,000 over the whole of life.
There is an element of retrospectivity here as the cap will include all non-concessional payments made from July 1 2007.
To prevent inflation whittling the cap away it, will be indexed to average weekly earnings.
Limits to tax-free pension funds
Superannuation pensions have been tax-free since 2007, but the budget introduces a limit of $1.6 million on earnings on funds in pension mode.
Those with more than this in their fund will have to move the surplus into an accumulation fund taxed at 15 per cent by July 1 2017. If your fund is below the $1.6 million level and subsequent growth pushes it above that level, it will remain untaxed.
High-income earners tax
Currently those with earnings of $300,000 and above have their concessional payments into super taxed at 30 per cent, not the 15 per cent others pay. This threshold will be reduced to $250,000.
Under these rules people have been able to take a tax-free super pension while working, effectively cutting their income tax and enabling them to continue making super contributions.
From July 1 2017 those pensions will now be taxed at 15 per cent, making the practice less attractive.
Low-income super tax offset
A Labor-era scheme that gives up to $500 a year super benefit to those earning under $37,000 has been extended from July 1 2017.
It ensures low-income earners don’t pay more tax on their super than on the rest of their income.
Contributions to partners
These arrangements allow high-earning spouses to pay up to $3000 into the super accounts of their low-income partner.
The income limit on the low-income partner has been boosted from $10,800 to $37,000. The high-income earner gets a $540 rebate on the payment.
Removal of the work test
This measure allows those aged between 65 and 74 to make super contributions without proving they worked 40 hours over a consecutive 30-day period.
These little-used measures remain unchanged. If you earn less that $34,454 and make an after-tax contribution of up to $1000 the government gives you a 50c in the dollar contribution into your fund.