The government has handed down the 2016-17 federal budget. Here are some of the highlights.
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Key bodies including the FPA, AFA, ASFA, SMSFA and the FSC paid special mention about to the raft of superannuation changes with particular about the changes to concessional caps and the changes to the Transition To Retirement strategy. Advice bodies have encouraged planners to speak to their clients who are approaching retirement as soon as possible.
The AFA said that planners could benefit from some key small business announcements as the tackle a changing market.
Moves to abolish the Low Income Super Contribution (LISC) shows the Federal Government can't be trusted with superannuation, said shadow minister for financial services and superannuation Jim Chalmers in response to yesterday's budget.
The government will introduce a $1.6 million superannuation transfer balance cap on the total amount of superannuation that an individual can transfer into retirement phase accounts. This puts a limit on taxpayer support for tax-free retirement phase accounts, but does not limit the savings that can be accumulated outside these accounts or outside superannuation.
The governement will also require those with combined incomes and superannuation contributions greater than $250,000 to pay 30 per cent tax on their concessional contributions, up from 15 per cent. This extends the current treatment of people with combined incomes and superannuation contributions over $300,000.
It will also lower the the superannuation concessional contributions cap to $25,000 per annum.
Further, the government will introduce a $500,000 lifetime cap for non-concessional contributions. The lifetime cap will limit the extent to which the superannuation system can be used for tax minimisation and estate planning.
Tax plan: target multinationals, changes to super concessions, tax relief for middle income earners & control govt spending #Budget2016— Dante De Gori CFP® (@ddegori10) May 3, 2016
TRR controversial changes
The government announced it plans to remove the tax exempt status of earnings supporting the transition to retirement income stream (TRIS), with those who currently have arrangements in place expected to be impacted.
Personal income tax relief
The government plans to prevent average full time wage earners from moving into the second top tax bracket until 2019-20 by increasing the 32.5 per cent tax threshold from $80,000 to $87,000. This will stop around 500,000 taxpayers facing the 37 per cent marginal tax rate.
Budget overview from Verse Wealth, a Synchron authorised representative.
Women's economic security
The government will introduce the 'Low Income Superannuation Tax Offset' to replace the 'Low Income Superannuation Contribution' when it expires on 30 June 2017.
This will allow individuals with an adjusted taxable income of $37,000 or less to receive an effective refund of the tax paid on their concessional contributions, up to a cap of $500. It is also intended to assist women to build their superannuation savings.
In addition, the government will allow the roll over of unused concessional cap amounts in order for individuals with superannuation balances of $500,000 or less to make ‘catch-up’ contributions.
There will also be an extension of eligibility for the tax offset for contributions made to a low income spouse’s superannuation.
Small business tax
From 2016-17, the unincorporated small business tax discount will be available to businesses with annual turnover of less than $5 million, up from the current threshold of $2 million, and will be increased to 8 per cent. The maximum discount available will remain at $1,000.
Over the next decade, the discount will be further expanded in phases to a final discount of 16 per cent.
The government said that it will establish a new Tax Avoidance Taskforce and a Tax Transparency Code will be introduced to encourage greater tax transparency within the corporate sector, especially by multinational corporations.
“These new laws will be backed up by a new operational taskforce of more than 1,000 specialist staff in the ATO to police and prosecute companies, multinationals and high wealth individuals not paying the tax they should,” the Treasurer Scott Morrison said in handing down this year’s Budget.
According to the government, the Taskforce is expected to raise $3.7 billion of additional revenue over the next four years.
A further four annual 12.5 per cent increases in tobacco excise will be implemented, with the first increase to take effect on 1 September 2017. The government will also provide an additional $7.7 million for the Tobacco Strike Team to combat illicit activity.
The government has committed $200,000 in this budget to promote Australia internationally as a fintech destination and to highlight commercial opportunities.
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