Budget 2016: Hardworking family left out in the cold on super limits
BUDGET 2016: DANIELLE and Paul Stott’s planning for a self-sufficient retirement could be hit by the $1.6 million limit on the super they can draw on tax free.
NSW
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DANIELLE Stott and her husband Paul are success stories. They work hard, earn a combined income of $180,000 and are likely to enjoy better incomes as they grow older.
But the pair’s planning for a self-sufficient retirement could be hit by the $1.6 million limit on the amount of superannuation in an account they can draw on tax free if they make generous contributions to their super fund.
Ms Scott, a flight attendant, said she and her plumber husband were not being rewarded for hard work.
“We kind of miss out — we’re a step above getting it all,’’ she said.
“We don’t come out on top by the time we pay for everything.”
The pair will benefit by about $600 a year in tax cuts.
INCENTIVE FOR MUMS, PART-TIME WORKERS
MUMS and part-timers are being encouraged to save with a new ”catch up’’ super incentive for anyone with retirement nest eggs under $500,000.
And millions of Australians earning under $37,000 will be spared a $500 super tax hit.
While the federal budget is clamping down on the rich using superannuation including a new $1.6 million limit on retirement nest eggs, low income workers will be encouraged to save.
“Our super system has been one size fits all for too long,’’ Treasurer Scott Morrison said.
“We need to ensure that our superannuation system is focused on sustainably supporting those most at risk of being dependepent on the aged pension.’’
Tradies who have taken time out of work due to injury, a mum who took time out to raise children and carers who stopped work to look after a spouse are all winners under the super catch up plan.
By allowing all workers to “bank” any unused super contribution cap, anyone with a nest egg under $500,000 will be able to make larger lump sum contributions when they can afford it to reduce their reliance on the aged pension.
The incentive is particularly aimed at mums and part-timers.
Currently, workers are only allowed to devote $30,000 a year to super in before-tax contributions with a concessional rate of 15 per cent.
That cap will be reduced to $25,000 a year. But to hit that cap based on earnings you would have to be earning over $250,000 a year or be making hefty voluntary contributions.
Three million low income workers, the majority of them women, will also be spared a $500 tax hit that was set to slug workers more tax next year simply because their employer is paying their super.
A new $500 rebate known as the Low Income Superannuation Tax Offset will refund low income workers when they face paying more tax simply as a result of compulsory super from next year.
Anyone with a retirement nest egg under $500,000 will be allowed to rollover their unused before tax super contribution cap,
limit to make larger contribution in later life when they have the flexibility to save.
Spouses will also be encouraged to make before tax contributions to their wives or husbands super with the income threshold for contributions made to a spouse to increase to workers earning $37,000. Delivering a form of income splitting for couples, it will help a modest 5000 couples where one spouse is on a low income.
Mr |Morrison last night pledged the changes would ensure the nation’s superannuation system was focused on keeping people off welfare.
“Together with raising your children and owning your own home, becoming financially independent in retirement, free of welfare support, is one of life’s great challenges and achievements,’’ he said.
“We will close off generous superannuation tax concessions for Australia’s most wealthy and better target tax concessions to hard working Australians saving and investing for their retirement so they are not dependent on the age pension.
part time workers women and anyone with low super balances will secure new sweeteners to help them boost their retirements savings and avoid relying on the aged pension.
Workers earning under $37,000 a year pay are the big winners with the introduction of a new $500 rebate known as the Low Income Superannuation Tax Offset.
It replaces Labor’s Low Income Super Contribution that was expected to be abolished by the Coalition next year leaving millions of workers worse off.
Self employed contractors will also benefit from the flexibility to make before tax super contributions or those without access to salary sacrifice deals, helping an estimated 850,000 workers.
For older Australians aged from 65 to 74 years of age, husbands and wives will also be offered greater flexibility to make contributions to their own or spouses super. This is expected to provide a superannuation boost for 40,000 retirees.
Currently, workers can make up to $30,000 a year in super contributions that are taxed at a concessional rate of 15 per cent.
— Samantha Maiden
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