Superannuation Reform Exposure Draft: Personal Contributions, Work Test and Tax Offsets
The Government has recently released three tranches of exposure draft for its proposed superannuation reforms. The exposure drafts address three areas, including the rules around deducting personal contributions and the work test, the reduced cap on concessional contributions and revised limits on non-concessional contributions.
In this article we outline the proposed changes included in the first tranche concerning deducting personal contributions, the work test, spouse contributions tax offset and the low income superannuation tax offset.
The existing 10% test for deducting personal super contributions, requiring an individual to earn less than 10% of their income from employment to be able to deduct a personal contribution, is to be removed. Regardless of their employment circumstances, all individuals up to the age of 75 will be able to deduct personal superannuation contributions.
The work test for those aged between 65-74 will be retained, which is contrary to the initial proposal outlined in the 2016-17 Budget. Consequently individuals in this age bracket will still need to meet minimum work requirements before making voluntary contributions (i.e. non concessional) to their super.
The low income threshold for the tax offset will be increased to $37,000, phasing out at $40,000. Individuals will not be eligible for the $540 tax offset for spouse contributions if their spouse’s non concessional contributions exceed the non-concessional contribution cap in the corresponding financial year.
This tax offset will replace the Government’s previous low income super contributions program. Going forward, individuals with adjusted taxable income of up to $37,000 will be eligible for a tax offset of up to $500 on concessional contributions.
The Treasurer has stated that the Government is on track to introduce its superannuation reforms into Parliament before the end of 2016, with changes to have effect from 1 July 2017.
Should you have any questions in relation to the changes, or super reform in general, please contact us or speak to your ESV engagement partner on 02 9283 1666.