The Turnbull Government today secured parliamentary passage of the most comprehensive suite of superannuation reforms in a decade, delivering on our commitment to improve the fairness, sustainability, flexibility and integrity of the superannuation system.
The superannuation reform package better targets tax concessions to make our superannuation system fair and sustainable, as the population ages and fiscal pressures increase. The reforms include the introduction of a $1.6 million transfer balance cap, which places a limit on the amount an individual can transfer into the tax-free earnings retirement phase and the introduction of the Low Income Superannuation Tax Offset, which is expected to boost the retirement incomes of around 3.1 million low income earners.
The passage of the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 and Superannuation (Excess Transfer Balance Tax) Imposition Bill 2016 will improve the underlying cash balance by $2.8 billion over the forward estimates.
To reflect how people work and save in our modern economy the reforms provide more flexibility to help Australians save for their retirement. The two key measures that deliver this improved flexibility are:
- the removal of the ‘10 per cent rule’ which will ensure a level playing field for access to superannuation tax concessions irrespective of their employment situation. This will particularly help contractors who also draw income from salary and wages. In 2017-18, it is estimated this change will benefit 800,000 individuals; and
- the ability for individuals with superannuation balances below $500,000 to make ‘catch up’ concessional contributions, which will help those with broken work patterns – the overwhelming number of whom are women – better save for their retirement. In 2019-20, this change is expected to help around 230,000 people.
These important changes level the playing field and provide more Australians with the opportunity to make full use of their concessional contributions cap.
Ninety-six per cent of individuals with superannuation will either not be affected by these changes or will be better off. The majority of the 4 per cent of individuals that are adversely affected by these changes are unlikely to rely on the Age Pension in retirement.
The passage of the package will make it possible for Australians to manage their superannuation and plan their retirement with certainty. It will also provide certainty for the superannuation industry, allowing it to implement the reforms by 1 July 2017.
The Superannuation (Objective) Bill 2016, which will enshrine the objective of superannuation in legislation, is being considered by the Economics Legislative Committee. The Committee is due to report on 14 February 2017.
The objective set out in the Bill has been an important anchor for the reforms that passed today. The Turnbull Government remains committed to ensuring the objective of superannuation is legislated to ensure all future superannuation proposals are consistent with the purpose of superannuation, providing greater stability for our important superannuation system.
Further details on the Government’s superannuation reform package are available on the treasury website.