You can currently receive concessional contributions of up to $30,000 a year (or $35,000 if you turn 50 or older in 2015/16) before extra tax is applied.
The Government plans to reduce this annual limit to $25,000, regardless of how old you are. The Government also plans to allow a person to access up to five years of past concessional contributions limits if they have contributed less than $25,000 a year. But this will only be available to people with less than $500,000 in super.
REMOVAL OF RESTRICTIONS ON MAKING SUPER CONTRIBUTIONS OVER AGE 65 TO 75
There are currently a series of aged-based limits that restrict when contributions can be made to super. The Government plans to remove these restrictions to allow people to contribute to their own (or their spouse’s super account) until the age of 75.
CHANGES TO THE RESTRICTIONS AROUND TAX DEDUCTIONS FOR PERSONAL SUPER CONTRIBUTIONS
People who are primarily self-employed currently need to meet a range of eligibility criteria in order to claim tax deductions on the personal contributions they make to super. The Government plans to allow all people up to age 75 to claim tax deductions for the personal contributions to super. These amounts will count towards the concessional contributions cap and will be subject to contributions tax.
CHANGES TO THE NON-CONCESSIONAL CONTRIBUTION CAP
The Government plans to introduce a lifetime non-concessional contributions limit of $500,000. The limit will count all non-concessional contributions back to 1 July 2007 and new contributions in excess of the limit will have to be withdrawn or may be subject to penalties. Where members have exceeded the cap prior to the start of the new rules, they will not be required to withdraw the excess contributions and will not be subject to any penalties.
INTRODUCING A LIMIT ON INCOME STREAM ACCOUNT BALANCES
There is currently no limit on the amount of super that can be used to start or be held in an income stream account. The Government plans to introduce a $1.6 million limit on both new and existing accounts. Any balances in income streams in excess of $1.6 million will need to be withdrawn or rolled back to super by 1 July 2017.
TAX ON INVESTMENT EARNINGS IN TRANSITION TO RETIREMENT INCOME STREAMS
The Government plans to tax the investment earnings of income stream accounts that are using a transition to retirement strategy. Currently, the investments earnings on all income stream accounts are tax-free. From 1 July 2017, investment earnings in transition to retirement income streams will be taxed at up to 15% in line with accumulation accounts.
Other proposed changes relating to businesses and individuals include:
COMPANY TAX RATE FOR SMALL BUSINESS WILL BE LOWERED TO 27.5%, WITH PLANS TO REDUCE IT FURTHER AND EXPANSION OF WHAT IS CONSIDERED AS ‘SMALL BUSINESS’ TO COMPANIES WITH ANNUAL TURNOVERS OF $10 MILLION IN 2016/17
A planned cut in company tax for small business takes rates down 1% to 27.5%. The Government also plans to expand what is considered as ‘small business’ to companies with annual turnovers of $10 million in 2016/17 (currently $2 million). Over the long term, the Government plans to reduce company tax to a flat rate of 25% for all companies regardless of size by 2026/27. And also it plans to progressively broaden the revenue-based definition of a small business as follows:
2017/18: $25 million
2018/19: $50 million
2019/20: $100 million
EXTEND THE INSTANT TAX DEDUCTION FACILITY FOR BUSINESSES WITH ANNUAL REVENUES OF UP TO $10 MILLION
Introduced last year, the Government plans to expand the instant tax deduction facility for businesses with annual revenues of up to $10 million up from the current $2 million threshold.
INCREASE TO $80,000 UPPER INCOME TAX LIMIT
Currently, annual incomes of $80,000 or more are taxed at a maximum rate of 37%. The Government plans to increase this threshold to $87,000.
INCREASE TO MEDICARE LEVY EXEMPTION THRESHOLDS
The Government plans to increase annual income levels before the Medicare Levy is payable:
Couples with no children: $36,001
Senior and Pension couples with no children: $46,966
Additional income for each dependant child: $3,306