On 7 September 2016, Treasury released exposure draft legislation and explanatory material on the Government’s 2016-17 Federal Budget announcements to change the superannuation system (to make it more ‘sustainable’ – read, less of a drain on the Federal Budget).
The draft legislation proposes to amend the ITAA 1997 and SIS Regs to implement the following Budget measures:
- Objective of superannuation – to be enshrined in stand-alone legislation;
- Deducting personal contributions – all individuals up to age 75 will be able to deduct personal superannuation contributions, regardless of their employment circumstances (getting rid of the less than 10% employment income for deductible personal contributions);
- Work test – for making contributions between ages 65-74 will be removed from reg 7.04 of the SIS Regs;
- Spouse contributions tax offset – the low-income threshold will be increased to $37,000 (phasing out up to $40,000) for a tax offset (up to $540);
- Low income superannuation tax offset – will replace the Government low income superannuation contributions. The tax offset (up to $500) will apply to concessional contributions for those with adjusted taxable income up to $37,000.
The date of effect was to be 1 July 2017 for all measures.
[LTN 173, 7/9/16]
But on 15 September 2016, the Government announced it was ditching the $500k lifetime non-concessional contributions limit (back dated to 2007) in favour of a $100k cap on non-concessional contributions (reduced from $180k) and to pay for this fiscal relaxation, it was not going to get rid of the work test (measure 3 above) and it would defer the ‘catch-up’ concessional contributions proposal until 1 July 2018.
[Related Tax Month article] [LTN 179, 15/9/16]