Federal Budget summary 2016


Federal Budget summary 2016



Chances are you’ve got bills to pay, a family to support and goals you want to achieve in retirement. So how might this year’s budget affect those things and you financially?

Federal Treasurer Scott Morrison put forward a number of proposed changes, mainly around contributions to superannuation and taxation, in the budget last night.

Here’s a brief roundup of what the proposals could mean for you—whether you’re starting out in your career, taking care of a family, on the cusp of retirement or enjoying life after work.

Remember, proposals are not set in stone and could change as legislation passes through parliament.



 Reduced cap on before-tax super contributions

 The government has proposed that from 1 July 2017 the concessional (before-tax) contributions cap be cut from $30,000 (or $35,000 for people over the age of 49) to $25,000 per year for everyone, irrespective of age.

 Ability to catch up on before-tax super contributions

 The government has proposed that from 1 July 2017 that individuals with a super balance of less than $500,000 be allowed to make additional before-tax contributions where they have not reached their concessional contributions cap in previous years.

Lifetime cap on after-tax super contributions

 The government has proposed that from 3 May 2016 the cap on non-concessional (after-tax) super contributions—which is currently $180,000 per person, per financial year—be replaced with a $500,000 lifetime cap.

The lifetime cap, if introduced, would take into account all non-concessional contributions made on or after 1 July 2007, with excess contributions being subject to tax or removed from the super system.

Those who have exceeded the $500,000 limit prior to budget night will not be penalised or required to remove any contributions, however, future non-concessional contributions will be classed as excessive.

Reduced threshold for high-income earners

 The government has proposed that from 1 July 2017, the high-income concessional contributions tax rate of 30%, which is double the 15% paid by most workers, will apply to those earning an annual income above $250,000. Currently the annual income threshold is $300,000.

Removal of the work test for voluntary super contributions

 The government has proposed that from 1 July 2017 individuals under the age of 75 will no longer need to meet the work test. Under current requirements, those aged between 65 and 74 must have worked for a set period of time in the financial year to be able to make voluntary super contributions.

Introduction of the Low Income Super Tax Offset

 Since July 2012, individuals with an income of up to $37,000 automatically received a government contribution of up to $500 paid directly into their super. This arrangement expires on 30 June 2017.

In order to replace this, the government has proposed that from 1 July 2017, it will introduce a Low Income Super Tax Offset. This will allow individuals with a total income of up to $37,000 to receive a tax refund up to $500 of the tax paid on their concessional contributions.

 Making spouse contributions more attractive

 Currently, an individual making a contribution into their spouse’s super account is entitled to a maximum tax offset of $540 if certain requirements are met.

The government proposes to increase access to the spouse super tax offset by raising the lower income threshold for the receiving spouse from $10,800 to $37,000.

Changes to transition to retirement strategies

 Investment earnings on super fund assets that support a pension are currently tax free, however the government has proposed that from 1 July 2017 this will no longer apply to transition to retirement income streams.

This means that earnings on fund assets supporting a transition to retirement strategy after this date will be subject to the same maximum 15% tax rate applicable to an accumulation fund.

For tax purposes you can also currently elect for certain super income stream payments to be taxed as lump sums, but the government is proposing to also remove this option.

 Introduction of a $1.6 million super transfer balance cap

 The government is proposing to introduce a $1.6 million transfer balance cap from 1 July 2017.

This cap will limit the total amount of accumulated super benefits that an individual can transfer into the retirement income phase. Subsequent earnings will not form part of this cap.

Where an individual transfers super amounts in excess of $1.6 million, or are already in the retirement income phase with a balance above $1.6 million, they’ll be able to maintain the excess amount in a super accumulation account where earnings will be taxed at the concessional rate of 15%.


 Changes to marginal tax rates

 A tax cut has been proposed at the current $80,000 taxable income threshold.

As a result, marginal tax rates for resident taxpayers are proposed to change as follows:


Want to know more?

Please contact us on 6436 0000.

Or go to www.budget.gov.au.

And remember, the proposals may change as legislation passes through parliament.


About the Author

Dr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist at AMP Capital is responsible for AMP Capital’s diversified investment funds. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.


Important note: While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.


Interwest Financial Services Pty Ltd ABN 99 008 956 876, Gary Powell, Ben Walker, David Wrightson, Andy van Geyzel and Tom Statham are Authorised Representatives and Credit Representatives of AMP Financial Planning Pty Limited ABN 89 051 208 327 AFS Licence No. 232706. This article contains general information only. It does not take into account your objectives, financial situation or needs. Please consider the appropriateness of the information in light of your personal circumstances.


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