Superannuation changes in 2016

Superannuation changes in 2016 have been dominated by the range of measures announced in the 2016/17 Federal Budget – though several of these changes to superannuation have been modified or abandoned. Below is a list of many of the changes to superannuation in 2016 and their current status.

In brief, many of the Government’s changes to superannuation announced in the 2016 Budget, some of which have subsequently changed, have passed the Parliament: Fair and Sustainable superannuation package passes Parliament.

Last updated: 23 November 2016. Note that not all changes to superannuation may be included in this article.

Legislated superannuation changes in 2016

Reduction in concessional contributions cap

The Government plans to reduce the concessional contributions cap to $25,000 from 1 July 2017. The concessional cap is currently $30,000, with a $35,000 cap for some older people.

The concessional contributions cap would also be indexed, to AWOTE, in $2,500 increments instead of the current $5,000.

Current status: the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 has passed the Parliament and is awaiting assent.

Changes to non-concessional contribution cap

New changes to the non-concessional contributions cap were announced when the Government dropped the $500,000 lifetime non-concessional cap, which was included in the 2016 Budget. Instead the policy is now for the non-concessional contributions cap to decrease from $180,000 currently to $100,000 from 1 July 2017. The three-year bring forward rule will remain, though non-concessional contributions will be prohibited for superannuation balances over $1.6 million, indexed to the Transfer Balance Cap.

Current status: the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 has passed the Parliament and is awaiting assent.

$1.6 million ‘Transfer Balance Cap’

The ‘Transfer Balance Cap’ would limit the amount of superannuation someone could transfer into pension phase to $1.6 million. People with over $1.6 million in pension phase at 1 July 2017 will be required to move the excess back into accumulation phase, though ‘transitional’ arrangements will apply.

The $1.6 million Transfer Balance Cap will be indexed to CPI, but on a ‘proportional’ basis – meaning the cap with vary between individuals.

Included in the legislation is a measure preventing SMSFs with at least one pension and a member with a balance over $1.6 million from using the segregated method to calculate the earnings tax exemption.

Current status: the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 has passed the Parliament and is awaiting assent.

Removing ECPI for Transition to Retirement pensions

The 2016 Budget included a change preventing Transition to Retirement pensions from being eligible for Exempt Current Pension Income (ECPI), from 1 July 2017. In other words super funds would start to pay tax on income relating to the pensions at the same rate as if the balance was in accumulation phase.

Changes to regulations are also planned which would remove the ability to treat certain payments as lump sums instead of income streams.

Current status: the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 has passed the Parliament and is awaiting assent.

End of 10% rule for tax-deductible super contributions

Another change in the 2016 Budget – from 1 July 2017 the ‘10% rule’, restricting who can claim tax deductions for personal superannuation contributions, would be repealed.

Current status: the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 has passed the Parliament and is awaiting assent.

Rollover of unused concessional contributions caps

This change would allow unused concessional contributions caps to be carried forward, on a rolling five year basis, for people with superannuation balances under $500,000.

As one change to offset the cost of changes to the non-concessional contributions cap policy, the carried-forward concessional contributions cap will be delayed by one year, to 1 July 2018. The EM to the Bill says: “An individual can carry forward unused concessional contributions cap amounts accrued from the 2018-19 financial year onwards.”

Current status: the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 has passed the Parliament and is awaiting assent.

Low Income Superannuation Tax Offset (LISTO)

The Low Income Superannuation Tax Offset (LISTO) would replace the Low Income Superannuation Contribution (LISC), cancelling out up to $500 of contributions tax for low income earners. Note that the LISTO is not actually a tax offset.

Current status: the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 has passed the Parliament and is awaiting assent.

Reduction in Division 293 threshold

The Government plans to change the Division 293 tax threshold, which can increase the contributions tax rate for high income earners from 15% to 30%, to $250,000 from 1 July 2017. The Div 293 threshold is currently $300,000.

Current status: the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 has passed the Parliament and is awaiting assent.

Expand spouse contributions

The 2016 Budget included a measure of expanding access to the low income spouse superannuation tax offset by increasing the income threshold for the low income spouse. It is proposed the upper threshold increase from $13,800 to $40,000 for the 2017/18 and later years.

Current status: the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 has passed the Parliament and is awaiting assent.

Stopping anti-detriment payments

The Government intends to stop anti-detriment payments. The EM to the Bill says: “The repeal applies in relation to lump sums that are paid because of the death of a member where that member died on or after 1 July 2017. However, from 1 July 2019, it applies to all benefits paid after this time, irrespective of whether the member died before 1 July 2017.”

Current status: the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 has passed the Parliament and is awaiting assent.

Single Touch Payroll

Single Touch Payroll is a system for the automatic electronic reporting of superannuation and payroll information to the ATO from business payroll software. Employers with 20 or more employees will be required to comply with Single Touch Payroll reporting requirements from 1 July 2018. The Government says it has not yet decided to require small employers to use Single Touch Payroll, though the ATO is conducting a pilot program.

The Single Touch Payroll provisions are included in the Budget Savings (Omnibus) Act 2016.

Pending superannuation changes in 2016

Increase tax on DASP to 95% for backpackers

As part of changes to the ‘backpacker tax’ the Government announced an increase to the tax on Departing Australia Superannuation Payments (DASP) to 95% for working holiday makers.

Current status: included in the Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2016, which is currently before the Senate.

Objective of superannuation

Following from a recommendation of the Financial System Inquiry, the Government has decided to put into legislation an objective for superannuation. The primary objective set out in the draft legislation is:

The primary objective of the superannuation system is to provide income in retirement to substitute or supplement the age pension.

The legislation also provides for subsidiary objectives to be set by regulation.

Current status: included in the Superannuation (Objective) Bill 2016, which has been referred to a Senate committee due to report in February 2017.

ATO Commissioner statutory remedial power

The Government still intends to give the ATO Commissioner the power to make modifications to the operation of tax laws, so that the law is administered as intended.

Current status: before House of Representatives – Tax and Superannuation Laws Amendment (2016 Measures No. 2) Bill 2016.

Expand employee choice of super fund

The Government may still intend to expand choice of super fund to employees under new workplace determinations or enterprise agreements made from 1 July 2016.

Current status: the legislation for this change lapsed when Parliament was prorogued ahead of the double dissolution election and has yet to be reintroduced – Superannuation Legislation Amendment (Choice of Fund) Bill 2016.

Changes to superannuation fund governance

The Government may still intend to change the governance requirements of large superannuation funds, including at least one-third independent directors and an independent chair.

Current status: the legislation for this change lapsed when Parliament was prorogued ahead of the double dissolution election and has yet to be reintroduced – Superannuation Legislation Amendment (Trustee Governance) Bill 2015.

Changes to Choice Product Dashboards and Portfolio Holding Disclosure

The Government may still intend to make changes to the Choice Product Dashboards and Portfolio Holding Disclosure requirements on large superannuation funds.

Current status: the legislation for this change lapsed when Parliament was prorogued ahead of the double dissolution election and has yet to be reintroduced – Superannuation Legislation Amendment (Transparency Measures) Bill 2016.

Abandoned superannuation changes in 2016

Lifetime Non-Concessional Contributions Cap

The 2016 Budget included a change of a $500,000 lifetime non-concessional contributions cap. However, after much controversy, the policy was dropped in favour of the changes to the non-concessional contributions caps as set out above.

Removing contributions restrictions for people aged 65-74

The Government announced, in the 2016 Budget, a policy of removing the ‘work test’, which restricted some older people from contributing to super, from 1 July 2017. However this policy was dropped, at least in the short term, in order to offset the cost of dropping the lifetime $500,000 non-concessional contributions cap policy.

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2 Replies to “Superannuation changes in 2016”

  1. If there was a complaint that the limit of $500000 non concessional payments was retrospective. Then the need to remove excess funds over $1.6 million already in pension phase is surely also retrospective.
    The shelving of eliminating the work test for 65 to 75 year olds would appear the biggest loss! The ability of a person to contribute tax debuctible funds for further 10 years has the potential to be a benefit for more people to add to their pension balance.

  2. I have no confidence in super .By not applying grandfather clauses to past allowable decisions people are skeptical that this is the thin end of the wedge.
    Tax in .tax on earnings and now tax on the way out….what a joke
    Don’t bother

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