5 things you should know about the 2016 Budget super changes

Описание: What should you do about all the super changes announced in the Federal Budget 2016? Find out from our experts.

TRANSCRIPT

Damian Graham: Last week’s Federal Budget certainly refocused the discussion on revenue and expenses for the Government, in trying to move the country back towards a budget surplus in the near term.

It’s interesting this is against a backdrop where we are seeing economic growth being fairly modest, and that was evidenced or emphasised by the Reserve Bank cutting interest rates last week.

One of the areas that has seen material changes in the Budget is superannuation. To discuss this in further detail I’m joined by Suzanne
Doyle. Dr Suzanne Doyle is our Head of Advice at StatePlus and she’s going to provide a lot more detail on what these measures may mean for our clients. Welcome Suzanne.

Suzanne Doyle: Thanks Damian. The Budget really did set out some significant changes to superannuation.

Firstly when you look at the contributions that you can make, there are essentially two caps.

One is the concessionally-taxed contributions that someone can make. They are now going to reduce that. The proposal is to reduce that to $25,000 per annum per person. Now the interesting thing is they’re actually going to make this something you can carry forward so if you can’t make the contribution in one year, you can actually carry it forward to the next year, and that will be on a rolling five-year basis.

The second cap is around what we call non-concessionally taxed contributions. Now they’re actually are going to introduce a lifetime cap of $500,000 per person. So that means once you’ve hit the cap, you actually can’t put anymore in.

Now the uncertainty around this change is that it actually applied from Budget Night.

Damian: So Suzanne you mentioned that people are now limited to how much money they can take out of super, can you give us more detail there?

Yes, another proposal is, to actually reduce the amount that people can take from their superannuation over into a pension. The cap that they’re proposing is 1.6 million dollars. So that’s going to limit the amount of money that people can actually take into a pension.

Damian: These changes seem quite material, Suzanne. What if someone is transitioning to retirement?

Suzanne: Transition To Retirement strategies were absolutely called out in this Budget paper. They’re going to propose a change to the taxation on the pension part of these strategies, which means that they’re no longer really going to be used for tax-effective savings, they’re really going to be used for, genuinely, people who are reducing their working hours. So, again, if you are using a TTR strategy at the moment it’s probably worth a look at that just to see how they’re going to play out.

Damian: With all these changes that are occurring, what else should people do?

Suzanne: Look, most of these changes don’t take effect, or they’re planned not to take effect, until 1st July 2017. So there’s no need to act that urgently. We really need to wait and see how the election plays out, and also how these changes actually present themselves once they become law.

So, that said, if you do have one of these strategies because you’re close to retirement, you may be looking at a big contribution because these are your last years of work, it would be good to check in with your planner and just to make sure they’re still OK.

Damian: Thanks Suzanne. Obviously you can see there’s a lot happening with regard to superannuation in the Budget. And we’ll look to keep you informed as things progress. Thanks for joining us.