The Peter Vickers Business Group was founded in 1979 by Peter Vickers – a core strength from day one was accounting. In order to satisfy the needs of our clients we have grown to provide a comprehensive range of financial services. We provide these services to a broad range of clients, across a diverse range of industries and professions, both in Australia and overseas.
The Treasurer announced changes to superannuation as part of his 2016 budget that he handed down on 3 May 2016. This budget was handed down in the run up to the Federal election that has since been announced for the 2ndJuly. It is thus difficult to discuss the announcements without entering into a political discourse but this is what will be attempted in this article.
Most of the changes announced in the budget commence from 1stJuly 2017. It is important to remember that the changes have not been introduced into parliament let alone passed into legislation and depend on the outcome of the election and also the next budget in May 2017. So all of this could change.
Currently the tax deductible con tributions whether personal or employer are taxed in the super fund at 15% except for income earners with a threshold of over $300, 000. This threshold is to be lowered to $250,000. The threshold has a complex formula for its calculation.
The restrictions on tax deductible (concessional) contributions are to be removed for those aged up to 75.
If you have a balance of less than $500,000 in your super then you will be able to make catch up extra concessional (deductible) contributions.
The restriction on personal concessional contributions is to be removed for those under 75. the maximum limit for concessional contributions has been lowered to $25,000
The income earned on funds in pension phase is currently exempt from tax. This is to be limited to a cap of $1.6m with the remainder having to be transferred to the accumulation account whose income is taxed at 15%.
The tax exemption of earnings of assets supporting a “transition to retirement” pension will be removed from 1 July 2017. This only applies to pensions being paid for 56 to 65 year olds who have not retired. The problem here is that these pensions are not commutable to a lump sum. That is you cannot change the pension. If you started such a pension on 1 July 2015 at age 60 (usual starting point as the receipt of the pension is exempt from tax in your return) then you will lose the tax exemption from age 62 to age 65 when the normal condition of release applies.
The change that starts at 7.30pm on budget night is that there is now a limit of $500,000 of non concessional contributions to a super fund. The contributions are added up from 1 July 2007. This is the date from which the Tax Office computer has records and thus the honesty of taxpayers is not needed for this calculation. If you had a balance above $500,000 at 7.30pm then you are not penalised but further contributions are not possible. Some years back you could put in $1m in a year. Care needs to be taken as taxpayers may have been planning to put in $540,000 before 30 June but this is now forbidden.
The raising of one of the thresholds from $80,000 to $87,000 saves a cup of coffee a week so let’s forget that.
However the most interesting benefit is that those businesses with aggregated turnover of under $10m will be able to deduct the full cost of assets that are under $20,000 that are purchased in the 2016/17 income tax year.
This is a summary only of a budget speech whose back up legislation has not even been introduced, about tax legislation that has complex rules and definitions eg aggregated income. Do not dare to even think of relying on anything stated here when making decisions.
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