Federal Treasurer Scott Morrison this week introduced a range of measures that effectively cut the tax breaks afforded to high-income earners in superannuation.
Notably, the government proposed requiring those with combined incomes and superannuation contributions greater than $250,000 to pay 30 per cent tax on their concessional contributions, up from the current 15 per cent.
Currently, only those earning more than $300,000 are subject to the additional 15 per cent tax. This proposal, if passed, will see the government collect taxes from a wider pool of high-earning Aussie investors.
The government also wants to see a tax-effective pension strategy cut effective immediately, and applicable even to those who implemented it under the pre-existing rules.
Mr Morrison said the plan is to remove the tax-exempt status of earnings supporting a transition to retirement income streams (TRIS).
“TRIS were designed to assist Australians to access limited superannuation savings to gradually move to retirement,” the government said.
“These changes ensure that TRIS remain fit for purpose, are not accessed primarily for their tax advantage, and still meet the objective of supporting people who want to remain in the workforce,” the government said.
In addition, despite extensive lobbying from representative bodies in the superannuation space, the government also announced it wants to lower the superannuation concessional contribution cap amount to $25,000 annually – currently it is $30,000 for those under 49 years of age and for those over age 49 it is $35,000.
Also, effective from 7.30pm on budget night, the government proposed introducing a $500,000 lifetime cap for non-concessional superannuation contributions.
“No retrospectivity will be applied to individuals who may have made non-concessional contributions in excess of the $500,000 lifetime threshold between 1 July 2007 to 3 May 2016,” explained the SMSF Academy’s managing director Aaron Dunn.
“However, any excess contributions made after commencement will need to be removed or else be subject to penalty tax,” he said.