There have been a number of changes to Superannuation Fund legislation in recent years – once in 2007, again in 2009 and with further reductions to the limits on superannuation concessional (taxed) contributions taking effect on 1 July 2012. Following is a summary of the changes to Superannuation pronounced in the 2012 Federal Budget.
Equitas Wealth employs a number of specific strategies to ensure our clients are maximizing their savings for retirement. For further information, please call (02) 9492 0444 to request a confidential discussion.
Changes to concessional super contributions caps for those 50 years +
The existing transitional $50,000 concessional contributions cap for individuals who are aged 50 or over ends on 30 June 2012.
Back in May 2010, the Government announced as part of the Stronger, Fairer, Simpler: A Tax Plan for our Future that from 1 July 2012, it would provide a higher concessional contributions cap for individuals aged 50 years or over with total superannuation balances below $500,000.
Disappointingly, in the 2012 Budget the Government deferred their commitment to this measure and pushed the start date back by two years, to 1 July 2014. From 1 July 2014, individuals aged 50 and over with superannuation balances below $500,000 will be able to make up to $25,000 more in concessional contributions than allowed under the general concessional contributions cap. The proposed change has not been legislated.
This means for the 2012/13 and 2013/14 financial years, the general $25,000 concessional contributions cap will apply to ALL individuals.
The general concessional contributions cap is projected to increase to $30,000 for the 2014-15 financial year (assuming AWOTE of 4% pa). This may mean the higher concessional cap would commence at $55,000.
For clients who are aged 50 and over this financial year, this is their last chance to take advantage of the higher $50,000 concessional contributions cap for at least 2 years.
Clients who are currently contributing more than $25,000 per financial year will need to review the amount they are contributing from July 2012. This may include reviewing salary sacrifice and TTR strategies.
Finer details on how the higher cap will operate from 1 July 2014 are still unknown.
Splitting contributions to spouses may become more attractive if this measure is introduced.
Additional 15% tax on super contributions for high income earners
In the 2012 Budget the Government confirmed the introduction of an additional 15% tax on concessional contributions made to superannuation for those earning income of more than $300,000 pa, effective 1 July 2012.
The definition of income for this purpose includes:
Adjusted fringe benefits
Total net investment loss
Target foreign income
Tax-free Government pension and benefits
Less child support payments
For the purpose of this additional tax, concessional contributions includes SG contributions, voluntary employer contributions, salary sacrifice contributions and personal deductible contributions. For defined benefit members, concessional contributions also include notional employer contributions to (funded and unfunded) defined benefit schemes.
The Government has advised that if a taxpayer’s income exceeds $300,000 only due to their concessional contributions, the additional 15% tax will only apply to that portion of their contributions in excess of $300,000. For example, where income excluding concessional
contributions is $285,000, and concessional contributions are $20,000 taking total income to $305,000, the additional tax will only apply on $5,000 of the concessional contributions.
The additional tax will not apply to excess contributions (those over the concessional contributions cap) as the individual has not received any tax concessions on these. Treasury will consult with the superannuation industry and other relevant stakeholders on further design and implementation details.
Superannuation Guarantee (SG) Changes
From 1 July 2013, the SG rate will gradually increase each financial year until it reaches 12% from 1 July 2019. The first increment in 2013/14 will bring the SG rate to 9.25%.
From 1 July 2013, the maximum age limit for receiving SG contributions (currently age 70) will also be abolished.
Leading up to the commencement on 1 July 2013, you may need to examine your salary sacrifice arrangements to ensure that the rise in SG will not result in you exceeding their concessional contributions cap.
SuperStream levy for superannuation funds
The Government confirmed that a temporary SuperStream levy will be paid by APRA-regulated superannuation funds to cover the costs of implementing the SuperStream reforms. This levy will be collected by APRA within the existing Superannuation Supervisory levy.
The additional SuperStream levy will be $121.5 million in 2012-13, $111.1 million in 2013-14, $83.1 million in 2014-15, $69.3 million in 2015-16, $41.2 million in 2016-17 and $40.9 million in 2017-18.
Whilst some of these measures are already legislated and others will need legislation to be introduced, it is important to have a plan in place to maximise existing opportunities and to be positioned appropriately for change.
Equitas Patners employs a number of specific strategies to ensure our clients are maximizing their savings for retirement. For further information, please call (02) 9492 0444 to request a confidential discussion.