Budget Highlights for Individuals:
- Tax cut for individuals earning more than $80,000.
- Increased eligibility to make concessional contributions to super but more limitations for those making larger contributions.
- Increase in availability of Low Income Spouse Contribution Offset.
- Extension of Low Income Super Offset
Tax Cut for Individuals Earning More Than $80,000
From 1/7/16 the threshold at which the 37% tax rate commences is to be increased from $80,000 to $87,000. This means an individual earning more than $87,000 will save tax of $315 per annum.
Changes to How You Can Claim Deductions on Super Contributions
Several changes have been made to concessional contributions being:
- If you are aged 65-74, from 1/7/17 you will be able to make concessional contributions regardless of whether you are working or not.
- If you are under 75, from 1/7/17 you will be able to claim deductions on additional super contributions without having to enter complex salary sacrifice arrangements or being restricted if you have employment income. This makes concessional contributions much easier to make.
- If you earn over $250,000 a year, from 1/7/17, contributions tax paid by your Super Fund on your contributions will be taxed at 30% rather than 15%. This tax rate is still 15% lower than if that income was taxed in your individual name.
- The concessional contribution cap for all individuals will be reduced to $25,000 from 1/7/17.
- If you have under $500,000 in your Super Fund you will be able to carry forward unused concessional cap amounts on a rolling five year basis from 1/7/17. For example if you contributed $10,000 per year for four years (Which is $15,000 per year below the cap amount) you would be eligible to contribute up to $85,000 as a concessional contribution in the fifth year (This is the annual cap amount of $25,000 plus four years of unutilised cap amounts).
Increase in Availability of Low Income Spouse Contribution Offset
From 1/7/17 you will be able to claim an offset for contributions made on behalf of your spouse if your spouse has an income below $37,000. This was previously only available if your spouse had an income under $10,800. The maximum offset is $540 which is applicable if you make a contribution of $3,000 on behalf of your spouse. It should be noted that spouse contributions are not eligible for the Government Co-Contribution so if you want to get the Government Co-Contribution as well you would either have to contribute more or claim less as a spouse contribution.
Extension of Low Income Super Offset
The low income super offset which provides a rebate of contributions tax of up to $500 for people earning less than $37,000 will now continue. It was originally due to be abolished but has instead been renamed.
Several important changes were also made to pensions and how much after tax contributions you can make. To read more about this click here.
If you own a business and would like to find out how the budget affects you click here.
It should be noted that all changes above are dependent on legislation being passed by parliament to approve the changes.
Advice should be sought before taking action on any of the above. If you have any questions please contact us.