The Budget has introduced a series of incentives to provide Australians with more choice and access to superannuation to help enjoy retirement.
The Government has recognised the current system offers limited flexibility for modern work patterns such as those who work part-time, take time out of work or have ‘lumpy’ income in which they make no or limited super contributions. Women, in particular, often experience breaks in work, or work part-time, which often results in lower super account balances than men.
Key measures have been introduced to address these issues and help create a more flexible and equally accessible super system. The following changes are aimed at bolstering the super savings for Australians in the modern economy:
Low Income Superannuation Tax Offset
The Low Income Superannuation Tax Offset (LISTO) will replace the Low Income Superannuation Contribution when it expires on 30 June 2017 to continue to support the accumulation of superannuation for low-income earners. The LISTO will allow individuals with an adjusted taxable income of $37,000 or less to receive a refund of the tax paid on their concessional contributions, up to a cap of $500.
This offset avoids the situation where low income earners were more highly taxed on their superannuation contributions than if they earnt the same income as wages or salary. The LISTO Contributions for low income spouses will, in particular, assist women to build their superannuation savings.
Contributions for low income spouses
The ability to claim a tax offset of up to $540 per annum for spouse contributions has become more accessible with the income threshold for spouses increased from $10,800 to $37,000. This measure is intended to apply from 1 July 2017.
A contributing spouse will be eligible for an 18 per cent offset worth up to $540 for contributions made to an eligible spouse’s superannuation account.
Age based contribution rules removed
The current restrictions on the minimum work requirements and spouse contributions for Australians aged 65 to 74 will be removed. Individuals aged up to 75 will be able to make voluntary or non-concessional superannuation contributions and receive superannuation contributions from their spouse from 1 July 2017. The incentive is to assist older Australians to make superannuation contributions appropriate to their circumstances.
Retirement income products
Barriers are being removed to endorse innovation in the creation of retirement income products. These income products can enhance the flexibility and choice for retirees to better manage risk and improve their standard of living in retirement.
From 1 July 2017, the tax exemption on earnings in the retirement phase will be extended to products such as deferred lifetime annuities and group self-annuitisation products.