WA Super News
The Government's proposed reforms to Australia's superannuation system
Recently the Government announced a number of future reforms to Australia’s superannuation system. These proposed reforms are focussed on the fairness, sustainability and efficiency of the superannuation system. However, most importantly, these changes are not yet law, and the Government has indicated it is unlikely they will be introduced into Parliament before the Federal election in September 2013. They will instead form part of the Government’s election policy platform.
If the Government is not re-elected, then these changes may not occur.
Given this uncertainty, it is important that you are aware of the announcements so that informed decisions can be made at the right time.
Overview of announcements
There is no change to the tax free status of payments you can received from superannuation funds after the age of 60.
However, when you have commenced an income stream from your accumulated superannuation savings, the current tax-free status of earnings on assets supporting that pension will be limited to the first $100,000 of earnings each year. Special rules will apply to capital gains that are realised on assets sold in a pension account. These changes will take effect from 1 July 2014.
Higher concessional contribution caps will be re-introduced.
A higher concessional cap of $35,000 will be available for people aged 60 and above from 1 July 2013. This higher cap will also be available for people aged 50 and above from 1 July 2014. There will be no limitation on who this is available to, other than age, and will allow you to make higher salary sacrifice or personal deductible contributions to super if you qualify.
This cap will not be indexed and it is expected that from 1 July 2018 the current $25,000 cap will have indexed to $35,000 and the same limit will apply to everyone irrespective of age.
Where you exceed your concessional cap, you will have the ability to avoid the excess contributions penalty tax.
Currently, where you exceed the concessional contributions cap (currently $25,000), any excess amount is taxed at 31.5% on top of the standard 15% tax rate, resulting in an overall tax liability of 46.5%. If you exceed by less than $10,000 a “one-off” opportunity is available to have the excessive amount returned to you and taxed at your personal marginal rate.
From 1 July 2013, the ability to have excess concessional contributions returned to you and taxed personally will be available each year and is not subject to a maximum limit. Where your marginal rate is less than 46.5%, this could save you tax.
New superannuation income streams commenced after 1 January 2015 will be subject to Centrelink’s deeming rules applying to financial investments generally.
This is less concessional than the current treatment, but is still likely to result in an amount being assessed by Centrelink that is lower than the actual cash payments received from your superannuation pension account.
Any existing income streams at that time will continue to be assessed under the existing concessional treatment.
The threshold below which “lost” or “inactive” super accounts will be sent to the ATO will increase from the current $2,000 threshold to $2,500 from 31 December 2015 and then to $3,000 from 31 December 2016.
This may assist you in tracking down and consolidating small super balances that you generated in previous years.
It is important to reiterate that, these changes are not yet law and it is unlikely they will be introduced into Parliament before the Federal election in September 2013.
Source: BT Financial Group.