Budget 2016

This summary of the 2016 Budget will not be looking at all aspects of the Budget it will just be dealing with changes to Superannuation and Taxation.

Superannuation

Lifetime cap on non-concessional contributions:

1.       Effective immediately

2.       Limit is now $500,000 over your life time

3.       Pervious limit was $180,000 per annum or $560,000 in a three year period

If you have already contributed over the $500,000 in non-concessional contribution you will not be able to make any more non-concessional contributions to super. If you have not then you can make up to $500,000.

You will however need to find out how much you have made in non-concessional contributions up until now.

High Income earned threshold dropped to $250,000, previously $300,000:

1.       If you earn over $250,000 an extra 15% tax will be applied to your superannuation.

2.       Example if you earn $260,000 then $10,000 of your super contribution will be subject to an additional tax of 15 % or $1500.

3.       Effective 01/07/2017

$1.6 Million cap on tax free pension balance:

1.       Once you move into pension phase the maximum amount you can have as a pension is $1.6 million.

2.       Additional amount over this in your super account will be left in accumulation phase. Any income earned on this amount will be taxed at 15%.

3.       Lump sum withdrawals can still be made tax free.

4.       Pension can be topped up if it drops below $1.6 million.

5.       Effective 01/07/2017

Transition to Retirement Pensions (TTR):

1.       Income on funds held in a TTR will be subject to tax.

2.       Remove rules to prevent treating income stream payments as lump sum payments.

3.       Effective 01/07/2017.

Work Test:

1.       Work test will be removed for people between the age of 65 -74.

2.       Allows people in this age group to make contribution to super if not working.

3.       Effective 01/07/2017

Concessional Cap changes:

1.       Concessional caps will change to $25,000 per annum for everyone.

2.       Unused Concessional cap amounts can accumulate for a period of 5 years as long as super balance is less than $500,000.

3.       Pervious concession caps we $30,000 under 50 years old and $35,000 between age 50 and 74 years old.

4.       Effective 01/07/2017 – important to make most of concessional caps for the 2016 and 2017 financial year.

 10 Percent Rule is scrapped:

1.       Previously if self-employed you could only make concessional contribution to super if less the 10% of your income came from employment.

2.       As rule is gone self-employed people will be able to make up to concessional cap. Careful to check how much super you have received from your employer as not to preach the cap.

3.       Effective as at 01/07/2017.

Low income Superannuation Tax Offset (LISTO):

1.       This will pay low income up to $500 into their super fund to offset the tax rate in the super fund being higher than their personal tax rate.

2.       This will apply to people earning up to $37,000 pa.

3.       Effective 01/07/2017.

Low income spouse tax offset increased:

1.       The income threshold has been raised form $10,800 to $37,000 before you no longer qualify for this rebate.

2.       The offset provides $540 per annum.

3.       Offset rate is 18%.

4.       This is in relation to partner making contribution for the spouse.

5.       Effective 01/07/2017.

Anti – detriment provisions in respect of death benefits payments from superannuation:

1.       This payment is in regards to the beneficiary receiving a refund of the 15% contribution tax which the deceased has paid over their lifetime.

2.       This payment went towards the beneficiary to reduce the tax payable on the amount received.

3.       Effective 01/07/2017.

Taxation

Personal Taxation relief:

1.       The stepped tax rate from 32.5% to 37% has increased $5000 from $80,000 to $85,000.

2.       Those earning $85,000 will save $225.

3.       Effective 01/07/2016.

Increase in Medicare Levy low income thresholds:

1.       Effective 01/07/2015 – will be available in the 2016 tax return

2.       This is the income you have to earn before paying Medicare Levy.

3.       Increased as follows:

a.       Individuals now $21,335

b.      Couples no children $36,001

c.       Pensions eligible of Seniors Card $33,738

d.      Pension Couples $46,966

e.      Add to each of above threshold $3238 for each child.

Indexation of the Medicare Levy Surcharge and Private Health Insurance rebate has been frozen until 30/06/2021.

GST on low value goods imported:

1.       Effective 01/07/2017.

2.       Any goods imported will be subject to GST.

3.       Provides a level playing field for retailers in Australia

Reduce Small company tax rate:

1.       Effective from 01/07/2016.

2.       Effects small business with turnover up to $10 million.

3.       Initially reduced to 27.5% down from 30%.

Increase in unincorporated small business tax discount:

1.       Currently tax discount is 5% this will increase to 16% over next ten years.

2.       Maximum discount will remain $1000 per individual.

3.       Effective 01/07/2016.