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Budget superannuation measures — first tranche of draft legislation released

On 7 September 2016, the Government released the first tranche of exposure draft legislation proposing to give effect to some of its 2016-17 Budget superannuation proposals.

Stuart Jones, Thomson Reuters

This draft legislation includes the:

The draft legislation proposes to amend the ITAA 1997 and SIS Regs to implement the following Budget measures:

  • Objective of superannuation — to be enshrined in stand-alone legislation. Namely, "to provide income in retirement to substitute or supplement the age pension". According to the Government, enshrining the primary objective of the superannuation system in legislation, in combination with the subsidiary objectives, will provide a framework against which future superannuation policy proposals can be assessed;
  • Deducting personal contributions — all individuals up to age 75 will be able to deduct personal superannuation contributions, regardless of their employment circumstances. This would be achieved by repealing the existing 10% test in sections 290-160 of the ITAA 1997 which requires an individual to earn less than 10% of their income from their employment related activities for them to be able to deduct a personal superannuation contribution. Of course, such deductible contributions would still effectively be limited by the concessional contributions cap of $25,000 proposed from 1 July 2017;
  • Work test — for making contributions between ages 65-74 will be removed from regulation 7.04 of the SIS Regs. Consequential amendments would also amend the "Attaining age 65" condition of release in Schedule 1 to the SIS Regs to allow the release of amounts held in superannuation at any time after a member attains the age of 65;
  • Spouse contributions tax offset — the low-income threshold will be increased to $37,000 (phasing out up to $40,000) for a tax offset (up to $540). Proposed changes to sections 290-230(4A) of the ITAA 1997 would also provide that a taxpayer would not be entitled to a tax offset when making contributions for a spouse whose non-concessional contributions exceed the non-concessional contribution cap in the corresponding financial year;
  • Low income superannuation tax offset — will replace the Government low income superannuation contributions. The tax offset (up to $500) will apply to concessional contributions for those with adjusted taxable income up to $37,000.

What's NOT in this first draft

Importantly, this first tranche of legislation does not include the more contentious measures announced in the 2016-17 Budget. The Government said it will continue to work with stakeholders to progress implementation of the other Budget measures, including:

  • the proposed $500,000 lifetime cap for non-concessional contributions;
  • $1.6m transfer balance cap for retirement accounts;
  • $25,000 concessional contributions cap;
  • catch-up contributions for balances below $500,000;
  • reduced tax concessions for transition to retirement pensions; and
  • anti-detriment deductions.

Date of effect

Generally 1 July 2017.

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