Federal Budget 2016-2017 Supernnuation

There were a number of changes to Superannuation in the Budget

Despite the headlines, these changes have no impact on the majority of taxpayers. Wealthy taxpayers with established super funds are slightly worse off if their fund exceeds $1.6m. To the extent their fund exceeds $1.6m, the income from the excess funds will be taxed at 15%. This is still a low rate of income tax.

Income on funds below $1.6m will still be tax-free. The $1.6 m limit is based on the reasonable assumption that the income generated tax-free on $1.6m is sufficient for citizens to live on in their retirement.

Another major change is that after tax contributions to super funds, known as non-concessional contributions, are now limited to $500,000 over the life of the fund. This is a substantial reduction but again should not impact the majority of taxpayers who will accumulate super over their working life.

The new rules also relax the definition of employment over 65, so that over 65s can contribute tax-deductible contributions of $25,000 per annum until aged 75.

In summary, Super funds are the most tax effective vehicle to own investments to provide income in retirement.