Last week the government announced several proposed superannuation reforms. If the reforms go through they may affect your superannuation plans. At this stage the reforms won’t be considered by Parliament until after the Federal election in September 2013.
The Proposed Changes
The concessional contribution cap will be increased to $35,000 per annum from 1 July 2013 for people aged 60 and over and from 1 July 2014 for people aged 50 and over. This is good news as it is an increase from the existing $25,000 cap
If concessional contributions are made that exceed the cap, then you will be able to withdraw the excess amount and pay tax on it at your marginal rate, plus an interest amount. At present, excess concessional contributions are taxed at 46.5% regardless of a person’s individual tax rate.
From 1st July 2014, only the first $100,000 of earnings from assets held in a superannuation pension will be tax free. Earnings above this will be taxed at 15%. At present all earnings of a superannuation pension are tax free, so this change would have an impact on those with larger superannuation balances of around $2 million
There will be a change to the way income payments from account based pensions are treated under the social security income test. This could potentially have an unfavourable effect on those taking out or changing an account based super pension from 1 July 2015.
- Click the link below for a more extensive summary of the reforms:
- Super Reforms Summary
Please don’t hesitate to contact us if you have any questions. It is too early yet to suggest any action as a result of the proposed reforms but we will keep you informed as more information becomes available.
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.