Prior to a Federal Budget there is always much speculation regarding possible changes that may occur within the superannuation system.
We have listed below the areas predicted most likely to be affected by the 2016 Federal Budget and potential strategies that may be considered.
Reduction of the Division 293 tax threshold
It is predicted that the current income threshold of $300,000 may be reduced to $180,000. This would result in individuals earning over $180,000 per year paying an extra 15% tax on their concessional superannuation contributions.
Strategy: Individuals earning over $180,000 per year may consider maximising their concessional superannuation contributions during the 2016 financial year. For added caution, these individuals may also consider making their contributions prior to the budget announcement on 3 May 2016.
Reduction of superannuation contribution caps
It has been predicted that the current concessional contribution cap may be reduced from $30,000 per year to $20,000 per year.
It has also been predicted that the current non-concessional contribution cap of $180,000 per year may be reduced to $120,000 per year.
Strategy: Individuals may consider maximising their superannuation contributions during the 2016 financial year. For added caution, individuals may also consider making their contributions prior to the budget announcement on 3 May 2016.
Changes to transition to retirement pension rules
Various possibilities in relation to transition to retirement pensions have been mentioned, including a tightening of the current rules, or even abolishment of transition to retirement pensions.
Strategy: Individuals looking at starting a transition to retirement pension may consider establishing the pension prior to the budget announcement on 3 May 2016.