Changes to arrangements for superannuation

The budget contained a significant number of changes to the taxation of superannuation, in some cases going further than had been indicated. The changes have the net effect of increasing the progressivity of superannuation tax, whilst also providing a substantial boost to government revenues.

Amongst the changes that target high-income earners:

• The income threshold for paying 30% tax on super contributions (instead of 15%, which everyone else pays) has been lowered from $300,000 to $250,000;
• The maximum yearly concessional contribution to super (that is, the amount you can put into your super each year out of your pre-tax income) has been lowered to $25,000;
• The maximum lifetime concessional contribution has been capped for the first time at $500,000;
• A lifetime cap of $1.6 million on the amount of super that can be transferred into retirement phase accounts has been introduced.

There are also several measures designed to make the superannuation system more accessible for lower-income earners:

• A Low Income Superannuation Tax Offset has been introduced to effectively lower the tax rate on contributions for low income earners to zero. This replaces the Low Income Super Contribution, a previously-existing government contribution to the super accounts of low-income earners abolished under the Abbott government.
• Unused concessional caps can be rolled over to allow those who leave the workforce for a period of time to make catch-up contributions. That is, if somebody doesn’t use up the maximum $25,000 concessional contribution in one year, they can roll over the leftover concessional amount to a future year.
• Regulations restricting people aged 65-74 to make contributions to their superannuation have been removed.

The policies are estimated to generate a net increase in government revenue from superannuation by $2.4bn over four years.