How decisions before 30 June 2016 may make a $51,000 difference to your super, and other interesting superannuation observations

On 3 May 2016 the Treasurer handed down the 2016-2017 Federal Budget. The Budget included wide-ranging proposals to change tax and superannuation systems and policies. We explore some of the practical implications which would arise, should those proposals become law.


Whether the Coalition's announced superannuation policies become law, will likely all come down to a small number of marginal electorates in the days after 2 July 2016. Whatever your thinking on how the election may pan out, some actions should be considered in any event in contemplation of the Coalition retaining office, and provided they otherwise make sense for your circumstances.

Of course, all such decisions need to be considered and taken in consultation with an appropriate adviser who understands your objectives, financial situation and needs.


Government Proposal

Observations in practice

Superannuation Concessions — taking effect from Budget night 3 May 2016


Introduction of a $500,000 lifetime cap for non-concessional contributions.

This limit takes into account non-concessional contributions made since 1 July 2007. So once you have hit the $500,000 mark, or if you have hit it already, then you won't be able to contribute more.

The introduction of a lifetime cap highlights the importance of considering other options for increasing members' superannuation balances.

  • Maximising concessional contributions

    Many people have their super contributed by their employers at the mandated rate. However by arrangement with their employers, employees can contribute more by salary sacrifice arrangements — up to their concessional contributions cap.

    The self-employed should likewise look to maximise their concessional contributions.

  • Borrowing

    The $500,000 lifetime limit brings into sharp relief the appeal of borrowing in super as a means of increasing one's investments in the concessionally taxed super environment.

    The (hoped-for) accretion in capital value of investments, using borrowed funds, is one means of indirectly circumventing the lifetime cap.

Superannuation pensions and concessional contributions — taking effect from 1 July 2017


Introduction of a $1.6 million superannuation transfer balance cap on the total amount of superannuation that an individual can transfer into retirement phase accounts.

This puts a limit on taxpayer support for tax-free retirement phase accounts, but does not limit the savings that can be accumulated outside these accounts or outside superannuation.

The proposal is that you essentially get one shot at what assets, or asset mix, will fund your pension to a limit of $1.6 million. That means you need to carefully consider what you transfer to your pension account, and what you transfer out of an existing pension account.

  • Couples need to plan actively

    Remember 'reasonable benefit limits' and the work that used to go into making sure a couple had roughly equivalent superannuation balances, so that both could access the tax free retirement amounts up to their maximum RBLs?

    Well that is again a live issue, and couples should plan actively with their advisers, and discuss how couples can make sure they have a combined tax free pension balance of $3.2 million (they should be so lucky!). Actions to consider include:

    • contributions-splitting, which will take on renewed importance;
    • spousal contributions on behalf of non-working or low paid spouses; and
    • ensuring access to and use of the new 'concessional contributions catch-up' for account balances less than $500,000 (discussed below, which helps those who have been out of the work-force to make contributions for previous years' unused cap amounts).

  • Administrative practicalities

    One would think that the same overall public policy outcome could be achieved by leaving pension income tax free up to an annual total, rather than assessing what assets — at what value — comprise a person's initial pension assets (potentially across a number of funds).

    Funds with existing pension accounts will need to ensure commutation rights under a fund or pension document are clearly stated and are strictly complied with, and that when a commutation is made, the assets which will fund the pension, or the mix of assets which will fund the pension, are clearly identified.

  • Asset mix

    The assets which will fund the pension is a critical factor.

    What if there is another GFC? Will the Government allow a top-up where superannuation (and pension) balances are seriously affected by declining asset values across the board?

    If those assets decrease in value, there's no opportunity to top-up the account. It appears the Government has forgotten the lessons of 2007/2008, when the Coalition allowed people to contribute $1,000,000 in non-concessional contributions to super before caps were introduced, immediately before the GFC struck.

  • Getting the right financial advice

    One would think it will be essential to obtain the best possible financial advice about which assets will fund the pension.

    Obviously achieving capital growth from the assets which fund the pension would be ideal (effectively augmenting the $1.6 million starting balance from which tax free income will be generated), but growth can only be achieved by taking risks. And when one starts a pension, it is not generally the time to start taking risks.


The superannuation concessional contributions cap is proposed to be lowered to $25,000 per annum for all, regardless of age.

The cap is lowered from 1 July 2017.

That means people should take full advantage now to make their full concessional contributions in each of:

  • 2015-2016 — by 30 June 2016; and
  • 2016-2017 — by 30 June 2017.

Until 30 June 2017, the concessional caps are:

  • $30,000 per annum if you are under 49 on 30 June in the previous income year; and
  • otherwise, $35,000.


Those with combined incomes and concessional superannuation contributions greater than $250,000 will be required to pay 30% tax on their concessional contributions, up from 15%.

This extends the current treatment of people with combined incomes and superannuation contributions over $300,000.

Again, as this change takes effect from 1 July 2017, the opportunity is for these high paid workers to make maximum concessional contributions at the lower 15% tax rate, both:

  • on or by 30 June 2016; and
  • on or by 30 June 2017,

before the higher tax rate takes effect.


Kris is a 38 year old partner in an accounting firm. As a partner, Kris has no employer who makes concessional contributions, and it is up to her whether she makes her own concessional contributions to super each year. In the year to 30 June 2016 Kris is paid $270,000, which will increase to $290,000 in the year to 30 June 2017.

Kris knows she needs to start thinking about her super, which has lain dormant for a while now, but is weighing up when to get things going again. While she does not have heaps of cash lying around, she probably has enough to get things started if she so chooses.

Kris decides to wait until July 2017 to get things organised — only 53 weeks away

In July/August 2017 Kris finally organises her contributions and decides to put her full concessional contributions amount into super in the 2017-2018 financial year.

From 1 July 2017, Kris can contribute $25,000 in concessional contributions, in respect of which she will pay $7,500 tax (at the rate of 30%), amounting to $17,500 in her super fund between now (June 2016) and 30 June 2018.

Kris bites the bullet and gets it done in June 2016

Kris bites the bullet and organises contributions for the 2015-2016 year at the last minute.

Kris can contribute $30,000 by 30 June 2016 and $30,000 by 30 June 2017, and from 1 July 2017 - $25,000 by 30 June 2018. For the first two contributions she will pay an effective tax rate of 15%, and for the third 30%.

So Kris can contribute $85,000, in respect of which she will pay tax of $16,500 (effective tax rate of 19.4%), leaving $68,500 in her super fund between now (June 2016) and 30 June 2018.


Introduction of the Low Income Superannuation Tax Offset to replace the Low Income Superannuation Contribution when it expires on 30 June 2017.

This will allow individuals with an adjusted taxable income of $37,000 or less to receive an effective refund of the tax paid on their concessional contributions, up to a cap of $500.

This is a measure relevant for those people who are out of the workforce for a period, but want to nurture their super balance as best they can.


The current spouse tax offset will be extended. The current income threshold for the receiving spouse (whether married or de facto) will be lifted from $10,800 to $37,000.

A contributing spouse will be eligible for an 18% offset worth up to $540 for contributions made to an eligible spouse's superannuation account.

As above.


Introduction of catch-up concessional superannuation contributions by allowing unused concessional contribution caps to be carried forward on a rolling basis for up to 5 years from 1 July 2017 for those with account balances of $500,000 or less.

As noted in the discussion regarding couples targeting equal pension account balances, this could be an important measure for those spouses who are out of the workforce for any period.

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Commercial team.

More Cleardocs information on related topics

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