Australia To Change 'Super' Concessions
09 May 2013
Posted by: Author: Mary Swire
Source: Mary Swire (Tax-News.com, Hong Kong)
Superannuation Minister Bill Shorten has confirmed that the Australian Government will introduce legislation to implement major changes to the superannuation system.
Last month, Shorten, together with Treasurer Wayne Swan, announced that it had become necessary to overhaul superannuation tax arrangements. They said that the system was no longer fair or sustainable, with current estimates suggesting that by 2017, 20% of the Australian population will be aged over 65. The legislation detailed by Shorten this week targets the concessional contribution element of the system.
Concessional contributions are those included in the assessable income of a superannuation fund, and include employer contributions and tax deductible personal contributions. Since 2007, these have been subject to annual limits. The present "general" cap is AUD25,000 (AUD25,496), and applies to all individuals.
A temporary higher cap of AUD35,000 will be introduced from the 2013-14 financial year for individuals aged 60 and over. Those aged 50 and over will benefit from the changes from 2014-15. This temporary cap will cease when the general cap indexes to AUD35,000. This is expected to occur in 2018.
The Government hopes that the measure will encourage Australians to contribute more to their superannuation later in life. "This means Australians reaching retirement age during the next financial year can contribute up to AUD10,000 more to their super at the concessional tax rate," Shorten explained.
An exposure draft of the legislation is available for comment until May 13.
Separate legislation will be introduced to permit individuals to withdraw from their superannuation fund, without penalty, any excess concessional contributions made from July 1, 2013. At present, concessional contributions made in excess of the annual cap are generally taxed at the top marginal income tax rate of 46.5%. Under the reformed system, any excess concessional contributions will be taxed at the individual's marginal tax rate, plus interest.
"This reform will ensure that individuals are taxed on excess concessional contributions in the same way as if they had received that money as salary or wages and had chosen to make a non-concessional contribution," Shorten said.