Technical Update – Budget Proposals

Below are the major proposed budget changes with the bulk of the changes taking effect in 1 July 2017 as follows:

  • Lowering the concessional contribution cap to $25,000pa for all ages.  It is at present $30,000, with $35,000 for those who turned age 50 in the current financial year.
  • The ability to contribute extra concessional contributions up to unused concessional caps over a rolling 5 year period for super account balances of less than $500,000.
  • Those individuals earning taxable income of $250,000 pa or more will attract a 30% tax on contributions. The current threshold is $300,000.
  • The ability for individuals to contribute to superannuation or receive a spouse contribution up to age 75 without a requirement to meet the work test.
  • There will be a $1.6M limit on transfers from superannuation into the tax free pension phase.
  • Non-concessional lifetime contribution cap of $500,000 starting on the 3 May 2016 and is retrospective in that it will take into account contributions since 1 July 2007.
  • Tax deductions for personal contributions for anyone under the age of 75.
  • Low Income Spouse contribution threshold to increase from $10,400 to $37,000 to access to $540 rebate.
  • Tax free pensions for deferred lifetime annuities and group self-annuitisation products.
  • Transition to Retirement Pensions to lose tax exemption on pension income and tax on earnings and now will receive the same treatment as accounts in accumulation phase.
  • Removal of anti-detriment provisions


The proposed changes to superannuation are substantial and creates uncertainty. On the other end, it also highlights the need for clients to obtain ongoing advice. Measures as such as changes to the low income spouse contribution threshold and the removal of the work test for those over age 65 to 75 present opportunities to financial advisers. Others changes will require a review of clients’ situation to ensure that the strategies are still in their best interests. All contributions strategies will require a review either to ensure that the concessional cap is not breached or to ensure that superannuation remains an appropriate strategy when compared to gearing or structuring into a Family Trust.

Of particular interest is the proposed lifetime cap of $500,000 on non concessional cap which captures contributions made after 1 July 2007. There will be  need to put on hold any further non concessional strategies for clients who have already contributed to the lifetime cap since 1 July 2007.

Transition to Retirement strategies as a rule will need to be revisited in light of the changes to the tax on pension income and earnings.  Financial modelling will become more important as it is now imperative to see how clients’ superannuation balance is tracking against the $1.6m limit.

The government has put together some fact sheets which clarify the measures. Click here to read more.