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Yellow Brick Road breaks down the Federal 2016-17 Budget released last night… What does it all mean for you and your finances?
Things you should know about your financial situation if you...
Earn $80,001 to $87,001
You’ll now fall into a new (lower) tax bracket. Basically, instead of paying 37% tax, you’ll now pay 32.5%. That should be good news for about 500,000 people.
Own an investment property
You’ll be relieved to know that no changes to current negative gearing arrangements were proposed in this budget.
Own a ‘small’ company
The definition of ‘small’ took a shake up yesterday - it no longer means an annual turnover of $2million. Now, your tax rate will be cut to 27.5%, if your company has an annual turnover of less than $10million. This comes into effect July 1, 2016. This will impact 870,000 small businesses in Australia.
Have taken time off work to raise kids
You can now make ‘catch up’ payments into your super when you return to the workforce if your super balance is under $500,000. This will impact 2 million Australians.
Are wanting to top up your super
The Government is lowering the annual cap on contributions entitled to the concessional tax rates to $25,000, from the current $30,000 for under-50s and $35,000 for those aged 50-plus.
Are about to retire
And you’re using a transition-to-retirement (TTR) strategy, be aware that your retirement income streams from TTR will now be taxed under the plan announced last night. For our full comments on the changes to TTR look out for executive chairman Mark Bouris’ column in tomorrow’s Sydney Morning Herald.
Earn over $250,000
You’ll be hit with 30% tax on your concessional (employer contributions, such as super guarantee and salary sacriﬁce contributions) super contributions. Less than three per cent of fund members will be affected by the lower concessional cap.
Consider yourself a ‘high end’ super user
There’s a new cap being proposed under the Budget of $1.6million that can be transferred tax-free into your retirement-phase. According to Treasurer Scott Morrison, “A balance of $1.6 million can support an income stream in retirement around four times the level of the single age pension.” In reality, less than one per cent of super fund members will be affected by the transfer balance cap.
Want to put hundreds of thousands into your super
There’s now a lifetime cap of $500,000 on all non-concessional contributions.