One thing which markets, investors, and ordinary householders hate is uncertainty, and the good news this week is that the Government’s changes to superannuation are now set in stone.
Federal Parliament this week passed the Government’s package of changes, which will save the budget $3 billion through a range of measures, largely targeted at higher income earners.
Here’s a summary of the most significant changes, which will come in July 2017:
- A $1.6 million cap on the total amount of super that can be transferred into a tax-free retirement account
- A reduction in the annual cap on personal concessional contributions to $25,000, and measures allowing catch up contributions of unused caps over 5 years for balances of $500,000 or less.
- An increase in super contributions tax to 30 percent on income above a threshold salary of $250,000 per annum.
- Personal deductions for contributions up to $25,000 a year for anyone under 75 to help self-employed and retirees continue to build their retirement savings
- An extension of eligibility for the tax offset for contributions to the super of a low income earning spouse
So, if you were concerned about the earlier plan to impose a $500,000 lifetime cap on after-tax super contributions made since 2007, then you can breathe a sigh of relief.
The Government has backed down on that plan, and it’s doubtful it will be revived.
It might not be an end to the super changes, however.
The Labor Opposition is keeping its powder dry, and supported the changes but says it will take its own plan to the next election.
If Labor win Government, there are likely to be more changes, the main one being lowering that 30 percent tax threshold down to people earning $200,000 a year.
This would catch more people in the higher tax net, and deliver more revenue for the Government.
This is despite the howls from the general public, saying “leave the super rules alone!”