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Treasurer Scott Morrison tonight delivered a Budget that outlines the most significant structural changes to the Australian superannuation system since compulsory superannuation was first introduced.
The Budget looks to, for the first time, define the objective of superannuation in legislation, with this objective ‘to provide income in retirement to substitute or supplement the Age Pension’. With this made clear, Budget documents outline measures to create a clear framework for superannuation policy, and a way to assess whether the system is in fact meeting these objectives.
“Together with raising your children and owning your own home, becoming financially independent in retirement, free of welfare support, is one of life’s great challenges and achievements,” Morrison said.
“We need to ensure that our superannuation system is focussed on sustainably supporting those most at risk of being dependent on an Age Pension in their retirement, which is the purpose of these concessions.”
While retirement accounts will retain their tax-free status, from 1 July 2017 the government will be introducing a host of new measures Morrison said aim to reduce access to generous superannuation tax concessions for the most wealthy.
These measures include capping the total amount of super that can be transferred into retirement account at $1.6 million; extending the 30 per cent tax on concessional contributions – pre-tax salary sacrifice contributions – to those earning over $250,000; reducing the annual cap on concessional superannuation contributions to $25,000, and, from tonight, establishing a lifetime non-concessional contributions cap of $500,000, that is, contributions made from money on which tax has already been paid.
From 1 July 2017, the Government will lift current restrictions and allow individuals under the age of 75 to claim tax deductions for personal superannuation contributions to eligible superannuation funds.
The government will also be lifting restrictions in order to allow individuals up to the age of 75 to claim tax deductions on personal contributions to eligible super funds, up from 65.
Also to be introduced from July 2017 is a Low Income Superannuation Tax Offset to ensure that those earning less than $37,000 are not paying more tax on their super than they are on their actual income.
Morrison said that, among others, this offset will assist around 2 million low income women in particular to build their superannuation savings.
Australian seniors advocacy group COTA Australia welcomed the changes, with chief executive Ian Yates saying, “COTA is pleased to see the government move in a direction that ensures superannuation is used for the purpose it was originally intended – as a way for people to save for their retirement rather than a wealth accumulation scheme for Australia’s highest earners.”
He said the lifting of age restrictions on personal contributions to those aged up to 75 acknowledges that more and more people are choosing to work well into their 70s, and “sends a positive signal about mature age employment.”
Yates added, “It’s also good to see the efforts made to recognise that many women retire with low superannuation because their careers are often broken by caring for children and ageing parents.
“The opportunity to make ‘catch-up’ contributions and for spouse tax offsets are a step in the right direction. More will still need to be done to ensure women have equitable retirement incomes, but it can’t all be done by the super system itself.”