The 2016 Federal Budget has all but been forgotten in the wake of the Election set for 2 July 2016. It is important to remember that the budget is merely a proposal put forth by the government of the day, it is not actually law until these policies get passed by the newly elected party. Whilst there has been plenty of negativity surrounding the budget, there are also some advantageous measures coming out of the budget.
The relevant policies to take from the budget, holding the assumption everything comes in as proposed:
· Removal of the work test for people aged over 65, as such everyone up to 75 can contribute to super and get the concessional tax deduction, which from 1 July 2017 is $25000. This is a great initiative for the super space!
· Removal of 10% Test: Even if you are earning wages and employer paying super you can contribute and get a tax deduction up to an aggregate $28K per year.
- This paves the way for a greater range of options and flexibility in tax planning.
· Allowance of catch-up concessional super contributions, for example, if you have only contributed 5K of the available concessional contribution each year for past 5 years, you can catch up using $25K annual deduction. The catch (as always) – an individual must have less than $500K in super to do so.
· Removal of tax exemption on earning of assets supporting (TRIS). Whilst the option is still available, any income earned on fund will be taxed at 15%. Will be best to look at stopping your Transition to Retirement or conversely, convert them to a normal pension, if this option is available to make use of the tax free income threshold.
· Limit of $500K on amounts that can be put into super on a non-concessional basis: this includes anything put in since 2007. However, I would suggest that you watch this space as the retrospectivity of this policy has caused quite the stir.
· Introduction of $1.6Mil superannuation transfer balance cap, this cap is on the total amount of super you can transfer into pension phase. However, the majority of pensions will still be tax free within the superfund, up to $1.6Mil.
Regardless of the Government, Super is always a changing vehicle, make the most of the good policies while you can! Most of the measures are not proposed to change from 1 July 2017, so still plenty of time to make use of the current measures.
Other proposals relevant to our client base:
· From 1 July 2016, 32.5% personal income tax threshold from $80000 to $87000. A slight tax saving for those creeping up a tax bracket.
· Small business income tax offset (SBITO) from 1 July 2016 will increase from 5% to 8%, however the $1000 cap per individual will remain – thus negating any benefit from such a proposal!
· Reduction in company tax rate, 1 July 2016 will be 27.5%
· Reminder of the $20000 Plant & Equipment Immediate Write off and the Primary Producer Accelerated measures :
o Immediate deduction for Water Facilities – dams, tanks ,bores, irrigation channels, pumps, water towers and windmills
o Immediate deduction for Fencing Assets – a repair of a capital capture, addition or extension
o Three year Depreciation for Fodder Storage Asses – silos and tanks used to store grain and other animal feed.
I can't stress enough to 'watch this space', having attended two conferences post budget those three words were the most important piece of information given!