Super has been the biggest area shaken up by the 2016 Budget, with annual concessional caps being lowered, lifetime non concessional contributions limits put in place and more high income earners facing higher contributions tax. Small and medium sized business has seen the greatest wins with great focus placed on lowering the company tax rate for them. And smokers will be burning money quicker than ever.
Annual concessional contribution caps have been lowered for everyone to $25,000. This will kick in from 1 July 2017. A lifetime non-concessional contribution of $500,000 will also be implemented from tonight.
The 30% tax on concessional contributions for those earning over $300,000 has now been extended to apply to those earning more than $250,000.
And those with super balances over $1.6 million have also been hit, as they will no longer be able to roll all savings into retirement funds with tax-free earnings.
A change to TTR income streams will see super balances supporting a TTR income stream subject to a 15% earnings tax (as in accumulation phase) from 1 July 2017. Prior to this, balances were not subject to tax.
But there is some good news in super. Those earning between $10,800 and $37,000, will have the ability to claim the spousal tax offset extended to them which effectively means a refund of up to $500 into their super account of the tax paid concessional contributions.
And the good news continues for those older Australians aged between 65 and 75 wanting to make contributions for themselves or their spouses – the work test requirements have been removed.
For small businesses with an annual turnover of less than $2million, the change represents an initial 1% reduction from 1 July 2016 and for businesses with an annual turnover of less than $10 million, the change represents an initial 2.5% reduction from 1 July 2016. This is part of a larger raft of company tax rate cuts which will see the company tax reach 25% for all companies in 10 years in the tax year 2026-27.
Also, from 1 July 2016, the Government will extend access to instant write off for equipment purchases of up to $20,000 that will expire on 30 June 2017, to businesses with an annual turnover less than $10 million.
To address the issue of bracket creep in personal income tax, anyone earning above $80,000 from 1 July will pay less tax with the 37% marginal tax rate not kicking in until your taxable income reaches $87,000.
Those earning more than $180,000 will see the Budget Repair Levy end as scheduled in 2017.
Previously promised childcare subsidies will be delayed until 2018, one year later than scheduled.
The biggest losers from the budget are those who smoke cigarettes. With four annual 12.5% increases in tobacco excise starting from 1 September 2017, there has never been a better time to quit.