This year’s Federal Budget saw a raft  of changes to superannuation with introduced measures intended to improve the sustainability and integrity of Australia’s superannuation system.

The following measures were announced, including:

Introducing a $1.6m transfer balance cap

There will be a $1.6 million superannuation transfer balance cap on the total amount of super that individuals can transfer into retirement phase accounts. While this limits taxpayer support for tax-free retirement phase accounts, it does not restrict the savings that can accumulate outside of superannuation.

From 1 July 2017, individuals who already have benefits in pension (earnings exempt) phase with a balance exceeding $1.6 million will be required to ‘transfer’ the excess over $1.6m back into the accumulation phase or pay out the benefits.

A lifetime non-concessional contributions cap

The introduction of a $500,000 lifetime cap  for non-concessional contributions  will  limit the extent  individuals can use superannuation for  tax minimisation and estate planning. Less than one per cent of Australian superannuation fund members have made contributions above this cap since 2007.

Reducing the concessional contributions caps

The superannuation concessional contributions cap will be lowered to $25,000 per annum to provide more flexibility and accommodate  modern working arrangements. Reducing the caps will only affect around three per cent of superannuation fund members, who will still be able to make enough contributions during their working life to be self- sufficient in retirement.

Catch-up concessional superannuation contributions will be introduced to allow those with lower contributions and interrupted work patterns to make ‘catch-up’ payments to boost their nest egg. This will apply to those with account balances of $500,000 or less whereby allowing unused concessional contribution caps to be carried forward on a rolling basis for up to five years.

Additional tax on concessional contributions

Those with combined incomes and super contributions greater than $250,000 will now be required to pay 30 per cent tax on their concessional superannuation contributions. This extends the current treatment of people with combined incomes and superannuation  contributions  over $300,000.

Changes to transition to retirement scheme

Earnings from assets supporting transition to retirement income streams (TRIS) will be taxed at  15 per cent instead of the current tax exempt status. Individuals will no longer be able to treat certain superannuation income stream payments as lump sums for tax minimisation purposes. The changes will apply from 1 July 2017 irrespective of when the TRIS commenced. These changes ensure TRIS are not accessed  primarily  for  their  tax  advantage.