• The threshold at which high income earners pay additional contributions tax will be lowered to $250,000 from 1 July 2017. The annual cap on concessional superannuation contributions will also be reduced to $25,000.
• The tax exemption on earnings of assets supporting Transition to Retirement Income Streams will be removed from 1 July 2017.
• A lifetime non-concessional contributions cap of $500,000 will be introduced. The lifetime cap will take into account all non-concessional contributions made on or after 1 July 2007 (i.e. from the 2008 income year) and will be indexed in $50,000 increments. The lifetime non-concessional cap will replace the existing annual caps which allow annual non-concessional contributions of up to $180,000 per year (or $540,000 every three years for individuals aged under 65).
• The current restrictions on people aged 65 to 74 making superannuation contributions for their retirement will be removed from 1 July 2017. People under the age of 75 will no longer have to satisfy a work test and will be able to receive contributions from their spouse.
• Individuals with a superannuation balance less than $500,000 will be allowed to make additional concessional contributions where they have not reached their concessional contributions cap in previous years, with effect from 1 July 2017. Amounts are carried forward on a rolling basis for a period of five consecutive years, and only unused amounts accrued from 1 July 2017 can be carried forward. The measure will allow people with lower contributions, interrupted work patterns or irregular capacity to make contributions, eg women or carers, to make "catch-up" payments to boost their superannuation savings. It will also apply to members of defined benefit schemes, with consultation undertaken to minimise additional compliance impact for these schemes.
• From 1 July 2017 all individuals up to age 75 will be allowed to claim an income tax deduction for personal superannuation contributions.
• A low income superannuation tax offset (LISTO) will be introduced to reduce tax on superannuation contributions for low income earners from 1 July 2017. The LISTO will provide a non-refundable tax offset to superannuation funds, based on the tax paid on concessional contributions made on behalf of low income earners, up to a cap of $500. The LISTO will apply to members with adjusted taxable income up to $37,000 that have had a concessional contribution made on their behalf.
• The income threshold for the receiving spouse (whether married or de facto) of the low income spouse tax offset will be increased to $37,000 from 1 July 2017.
• A balance cap of $1.6m on the total amount of accumulated superannuation an individual can transfer into the tax-free retirement phase will be introduced from 1 July 2017. Subsequent earnings on these balances will not be restricted. This will limit the extent to which the tax-free benefits of retirement phase accounts can be used by high wealth individuals. Where an individual accumulates amounts in excess of $1.6m, they will be able to maintain this excess amount in an accumulation phase account (where earnings will be taxed at the concessional rate of 15%). Members already in the retirement phase with balances above $1.6m will be required to reduce their retirement balance to $1.6m by 1 July 2017. Excess balances for these members may be converted to superannuation accumulation phase accounts. A tax on amounts that are transferred in excess of the $1.6m cap (including earnings on these excess transferred amounts) will be applied, similar to the tax treatment that applies to excess non-concessional contributions.
Increased turnover threshold for small business income tax concessions
The small business entity turnover threshold will be increased from $2m to $10m from 1 July 2016. The increased threshold means businesses with an annual turnover of less than $10m will be able to access existing small business income tax concessions including the:
• lower small business corporate tax rate (which will be reduced to 27.5% from the 2016/17 income year)
• simplified depreciation rules under Subdiv 328-D of the Income Tax Assessment Act 1997 (ITAA 1997), including the instant asset write off threshold of $20,000 available until 30 June 2017
• simplified trading stock rules under Subdiv 328-E of ITAA 1997
• option to account for GST on a cash basis and pay GST instalments as calculated by the ATO
• simplified method of paying PAYG instalments calculated by the ATO, and
• other tax concessions such as the extension of the FBT exemption for work-related portable electronic devices available from 1 April 2016 and the immediate deduction of professional expenses under s 40-880 of ITAA 1997.
The increased $10m threshold will not be applicable for accessing the small business capital gains tax concessions. These concessions will remain available only for small businesses with a turnover of less than $2m or that satisfy the maximum net asset value test. The unincorporated small business tax discount (which will be increased to 8% from 1 July 2016) will however be accessible to small businesses with a turnover of less than $5m.
Individuals and families
• The threshold at which the 37% marginal tax rate for individuals commences will increase from taxable incomes of $80,000 to $87,000 from 1 July 2016, preventing around 500,000 taxpayers facing the 37% marginal tax rate.
• The low-income thresholds for the Medicare levy and surcharge will increase from the 2015/16 income year.
• The pause in the indexation of the income thresholds for the Medicare levy surcharge and the private health insurance rebate will continue for a further three years from 1 July 2018.
• Income tax exemptions will be provided for ADF personnel deployed in Afghanistan, the Middle East and in international waters.
• Six organisations have been added to the list of specifically-listed deductible gift recipients.
The low-income thresholds for the Medicare levy and surcharge will increase from the 2015/16 income year. The changes are in the Tax and Superannuation Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2016.
The increases take into account movements in the consumer price index (CPI) so that low-income earners generally continue to be exempted from the Medicare levy.
The threshold for singles will increase to $21,335 (up from $20,896 for the 2014/15 year). For couples with no children, the threshold will increase to $36,001 (up from $35,261 for the 2014/15 year).
For single seniors and pensioners, the threshold will be increased to $33,738 (up from $33,044 for the 2014/15 year). For senior and pensioner couples with no children, the threshold will be increased to $46,966 (up from $46,000 for the 2014/15 year).
The child-student component of the income threshold for all families increases to $3,306 (up from $3,238 for the 2014/15 year).
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.