The government recently announced some changes to superannuation that will take effect from 1 July 2013. These changes are outlined below, however, if you want to know how you personally will be affected don’t hesitate to give us a call.
Increase in the concessional contribution cap
- A higher concessional contributions cap of (unindexed) $35,000 cap for people aged over 60.
- From 1 July 2014, extending the higher concessional cap to those aged 50 and over.
- The general concessional cap of $25,000 for all other individuals is expected to reach $35,000 from 1 July 2018.
- There are no proposed changes to the non-concessional contributions cap.
Changes to the excess contributions tax system
- The Government will allow all individuals to withdraw any excess contributions made from 1 July 2013 from their superannuation fund.
- Excess concessional contributions will be taxed at the individual’s marginal tax rate, plus an interest charge to recognise that the tax on excess contributions is collected later than normal income tax.
Threshold placed on tax exemption status for pension accounts
- From 1 July 2014, tax exemption on superannuation earnings supporting pensions and annuities will be capped at $100,000, and anything above that level taxed at a rate of 15 per cent.
No changes to tax free super benefits
- These changes will not affect the tax treatment of withdrawals. Withdrawals will continue to remain tax-free for those aged 60 and over, and face the existing tax rates for those aged under 60.
Changes to income stream accounts
- The Government will extend the normal deeming rules to superannuation account-based income streams for the purposes of the pension income test to ensure all financial investments are assessed fairly and under the same rules.
- Standard pension deeming arrangements will apply to new superannuation account-based income streams assessed under the pension income test rules after 1 January 2015.
- All products held by pensioners before 1 January 2015 will be grandfathered indefinitely and continue to be assessed under the existing rules for the life of the product so no current pensioner will be affected, unless they choose to change products.
- Related articles:
- How Much Do I Need to Retire?
- The Difference Between Super and Account Based Pensions
The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.