Australia: Superannuation slammed and carved up in budget – the reform cycle continues

Sweeping superannuation changes that will significantly impact industry and all superannuants have been announced by the Federal Government in its 2016/2017 Budget under the mantra of a new purpose for superannuation – "to provide income in retirement to substitute or supplement the Age Pension".

Industry reaction has been swift and relatively consistent. The reforms are the most significant we have seen in terms of superannuation and tax since the so-called Simpler Super changes in 2007.

Despite the Government's pre-election commitment to not introduce any adverse changes to superannuation in this term of Parliament, there are many who will be disappointed with the Government's cuts to the concessional contributions cap and the introduction of a lifetime cap for non-concessional contributions.

Service providers and industry participants will be justifiably concerned with the complexity associated with measures seeking to limit retirement balances in super to $1.6 million. Coupled with other aspects of the proposed superannuation reforms, these measures will mean investors may need to look elsewhere to house their money.

It remains to be seen what impact the proposals will have on the Government's retirement income strategy and reliance on the Age Pension. What is certain is that the reform cycle for superannuation will continue in earnest and confidence in the system will continue to dive.

The table below (and attached by clicking download at the top of this article) provides a high level summary of the major superannuation and regulator reforms announced in the Budget. If you have any queries about how these changes impact you, please contact a member of our team.


Amendment Need to know
What's new:

Maximum $1.6 million balance for retirement accounts from 1 July 2017 (ie those in the payment phase cycle).
Read more: Budget Paper No 2 at pages 25-26 Treasurer's press release, 3 May 2016 Budget Superannuation Fact Sheet 2

  • Any excess above must be retained in an accumulation account where it will continue to be taxed at a 15% rate.
  • The maximum cap applies to existing accounts as well. The excess over $1.6 million must be transferred back to an accumulation account or withdrawn.
  • Similar measures will apply for defined benefit schemes.

Lifetime cap of $500,000 on non-concessional contributions. The cap will commence from 7.30 pm on 3 May 2016.
Read more:
Budget Paper No 2 at page 27 Treasurer's press release, 3 May 2016 Budget Superannuation Fact Sheet 4

  • The existing cap of $180,000 per year or $540,000 every 3 years is being removed.
  • The cap is retrospective and will include all non-concessional contributions made after 1 July 2007.
  • Exceeding the cap will trigger penalty tax, although anyone who has already exceeded the cap is exempt (unless new contributions are made in breach of the cap).

"Catch up" for account balances less than $500,000 from 1 July 2017.
Read more: Budget Paper No 2 at page 24 Treasurer's press release, 3 May 2016 Budget Superannuation Fact Sheet 8

  • The unused portion of each year's concessional contribution limit can now be carried forward.
  • The cap is carried forward on a rolling basis for a consecutive period of 5 years.

Tax exemption extended for retirement income products.
Read more:
Treasurer's media release, 3 May 2016 Superannuation fact sheet 11

  • The tax exemption on earnings in retirement phase will be extended.
  • This should enable the development of deferred lifetime annuities and group self-annuitisation products.
What's being tinkered with:

Annual cap of $25,000 on concessional contributions from 1 July 2017.
Read more:
Budget Paper No 2 at pages 28-29 Treasurer's press release, 3 May 2016 Budget Superannuation Fact Sheet 3

  • The existing cap of $30,000 or $35,000 (depending on age) will be removed.
  • A $25,000 cap applies to all individuals regardless of age.
  • Penalty tax for excess concessional contributions will continue.

Division 293 tax commences from $250,000 threshold.
Read more:
Budget Paper No 2 at pages 28-29 Treasurer's press release, 3 May 2016 Budget Superannuation Fact Sheet 3

  • The existing $300,000 threshold is being lowered.
  • Division 293 tax effectively doubles the contributions tax rate on concessional contributions.
  • The special definition of income for the purpose of Division 293 tax can result in those with incomes lower than $250,000 being caught.

Changed tax treatment for transition to retirement pensions from 1 July 2017.
Read more:
Budget Paper No 2 at page 3 Superannuation fact sheet 12

  • Earnings on assets supporting a transition to retirement pension will be taxed at 15%, instead of 0%.
  • All existing transition to retirement pensions are affected.

Low income super tax offset to be introduced. Read more: Budget Paper No 2 at page 28 Superannuation fact sheet 6

  • The new offset replaces the existing Low Income Superannuation Contribution.
  • The offset is being paid to super funds and applies to members with an adjusted taxable income of $37,000.

Low income spouse super tax offset to be extended. Read more: Budget Paper No 2 at page 25 Superannuation fact sheet 10

  • A new method for calculating the offset enables limited contributions on behalf of a spouse where their salary exceeds $37,000.
  • Effectively the value of the offset reduces to zero after the spouse's income exceeds $40,000.

Work test for contributions to be removed for age 65 to 74. Read more: Budget Paper No 2 at pages 24-25 Treasurer's press release, 3 May 2016 Budget Superannuation Fact Sheet 9

  • Those under the age of 75 will no longer have to satisfy a work test.

Tax deductions for personal superannuation contributions extended from 1 July 2017.
Read more:
Budget Paper No 2 at page 28 Superannuation fact sheet 7

  • All individuals up to age 75 will be able to claim an income tax deduction for personal contributions.

Anti-detriment deduction to be removed for super benefits from 1 July 2017. Read more: Budget Paper No 2 at page 29 Treasurer's press release, 3 May 2016

  • The purpose of the reform is to align the treatment of lump sum death benefits across all superannuation funds and the treatment of bequests outside superannuation.
New regulator funding – who gets what?

Read more:
Budget Paper No 2 at pages 172

  • Additional $9.7 million over 3 years for data collection and dissemination systems and $11.2 million for maintaining those systems.
  • Supervisory levies to be increased from 2016/17 to pay for the above.

Read more:
Budget Paper No 2 at pages 148-149 and 172

  • $121.3 million over 4 years for surveillance and enforcement activities in financial services. A particular focus for the money is on financial advice, responsible lending, life insurance, breach reporting and data analytics. Commentators have acknowledged that this is effectively a reinstatement of cuts to ASIC's budgets in previous years.
  • $6.2 million in 2016/17 to support the commencement of the industry funding model for ASIC. The money is marked for developing a levy calculator and improving internal billing and time recording systems.
  • Provision of $144.5 million over 3 years from 2017/18 pending the development of industry charging arrangements for ASIC has been made.

Superannuation Complaints Tribunal (previously announced on 20 April 2016).
Read more:
Budget Paper No 2 at page 153

  • $5.2 million for hearing existing complaints and improving internal funding.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Most awarded firm and Australian deal of the year
Australasian Legal Business Awards
Employer of Choice for Women
Equal Opportunity for Women
in the Workplace (EOWA)

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.