The 2016-17 Federal Budget is a budget of targets – broad targets to boost business and innovation, and the narrow revenue targets of the wealthy and multi-nationals. It’s a big, long-term crafted budget designed to give enough pre-election glow but with structural measures to control spending and reduce concessions.
So how might this effect you?
- The work test will be abolished as at 1 July 2017, re-opening the door to all contributions for those between the age of 65 – 74.
- Concessional contribution caps (pre-tax) will be lowered to $25,000 from 1 July 2017.
- Personal contributions to super will provide a tax deduction (up to $25,000), regardless of your employment status. Currently the deduction is limited to the unemployed, self-employed or ‘substantially self-employed’.
- Individuals with superannuation balances under $500,000 will be entitled to rollover their unused concessional contributions caps from the previous 5 years.
- Non-concessional contribution caps (post-tax) will be reduced to a ‘life-time limit’ of $500,000 effective from 7.30pm budget night. This will include all non-concessional contributions made from 1 July 2007.
- $1.6 million superannuation transfer balance cap, effective 1 July 2017. This will limit the amount that a single member can hold in a tax-free retirement account, with the balance above $1.6 million required to be held in accumulation with a 15% tax rate on earnings.
- Transition to retirement pensions (TTR) will lose their tax concessions within superannuation (effective 1 July 2017), and the assets supporting the pension will continue to be taxed at 15% until all benefits are unrestricted non-preserved. This will not be grandfathered to those in existing TTR pensions.
- Anti-detriment payments will be abolished from 1 July 2017.
Personal wealth accumulation
- 32.5% personal income tax threshold will increase from $80,000 to $87,000 from 1 July 2016.
- Division 293 superannuation tax will be introduced for those earning above $250,000. This will see an additional 15% tax on concessional contributions, up to a total rate of 30%. This change involves reducing the threshold from its current level of $300,000. Based on $25,000 in contributions, this can increase the tax on contributions by $3,750.
- Low-income superannuation tax offset will be introduced to reduce the effective tax rates on concessional contributions to super for those with incomes under $37,000.
- Spouse superannuation tax offset will provide a contributing spouse with an 18% tax offset for a $3,000 contribution into the lower-income earning spouse’s account. The lower income threshold will be raised from $10,800 to $37,000.
Big, medium and little business
- Reducing the company tax rate to 25% over 10 years. Franking credits will also be adjusted in line with the company tax rate.
- Business entity aggregated turnover will increase from $2m to $10m for the purposes of accessing certain existing income tax concessions, allowing more business entities to gain access to small business concessions.
- ASIC will receive $127.2 million over four years to fight against misconduct in the financial services industry.
- The ATO will receive an additional $678.9 million to establish a new Tax Avoidance Taskforce. This will include the introduction of “UK style” diverted profits tax to reign in multinationals with global revenue of $1billion or more.
Finally, we remind you that the above announcements are still only proposals at this stage and will depend on the outcome of the upcoming election and on the proposals being legislated. However, if the above do pass to legislation, they may have a significant impact on your financial situation. It’s important that you understand your options and take advantage of all opportunities to manage your financial situation and to build wealth.
Ensuring the different parts of your financial world work together in harmony is essential when it comes to optimising your prosperity. From financial planners and taxation specialists to mortgage brokers and property investment consultants, we work together to ensure your financial well-being is supported across all areas. By entrusting us with knowledge across your financial spectrum, our plan is more informed, tailored and empowered to reach your unique financial goals.
If you’d like to discuss your personal situation please contact our team today on 1300 925 081 or via our contact form.
Finally, CXC Global have also posted a great summary here: http://www.cxcglobal.com.au/federal-budget-2016-the-round-up.
The above is provided as information only and does not represent financial advice. We recommend that you engage a professional financial planner before deciding whether or not to adopt a strategy or purchase a financial product.