Unlike the last couple of years, this year’s federal budget did include a few surprises. There have been wholesale changes to Superannuation which affect contribution levels, tax free amounts and tax rates for high income earners. As the vast pool of superannuation assets has grown from $245 billion in 1996 to $2.05 trillion today it has increasingly come under scrutiny from legislators particularly at the wealthy end of the scale.
There has been a modest change to personal taxation rates to account for bracket creep but the big winner is small business who will see their tax rates falling in coming years. This has been funded through a combination of the superannuation changes and an increase in the tax on smoking.
It is important to remember that the announcements in the budget are proposals only and may never pass into law.
The key points of interest are as follows:
Superannuation pension cap
A maximum of $1.6m may be held in a superannuation pension.
Superannuation contributions caps
A lifetime limit of $500k of after tax contributions and an annual limit of $25,000 of concessional contributions has been proposed.
Higher super tax for high income earners
Those who earn more than $250k per annum will pay higher tax on their contributions.
Company tax reduction
Company tax will reduce by 2.5% next financial year for businesses which have a turnover of under $10m. In future years the government is proposing to increase the turnover cap so all businesses benefit.
Personal Tax Rate Changes
Individuals will see a small reduction in tax as the government makes a minor adjustment to account for bracket creep.
For more information on the 2016 Federal Budget, you can download budget documents from budget.gov.au.
If you would like to discuss superannuation, insurances or obtain wealth advice, please contact us on 1300 557 782 or email us at email@example.com and a member of our team will be able to assist you.