The recent change in Government has spurred a decision to abandon some of the previous Government’s superannuation proposals. We have detailed below the changes announced to date:
Increase in Superannuation Guarantee Contributions – Delayed
The previous Government put into place a stepped increase in the compulsory Superannuation Guarantee Contributions (SGC) for employees, which saw employees receive 9.25%, an increase of 0.25% in the 2013/2014 financial year. Another increase of 0.25% was to be expected in the 2014/2015 financial year, with 0.50% increases in each year thereafter to reach 12% by 2019/2020.
The Coalition Government has delayed the increases to SGC contributions by another two years. This will see the SGC rate remain at 9.25% for the 2013/14, 2014/15 and 2015/16 financial years, with the SGC reaching 12% in 2021/2022. The following graph illustrates the SGC increase schedule:
Contribution Caps – Retained
An important aspect to superannuation which was not changed by the new Government was the increased concessional contribution cap for those aged 60 and over in 2013/2014 and 50 and over in 2014/2015.
- From 1 July 2013 taxpayers aged 60 and over will have a $35,000 cap, and
- From 1 July 2014 taxpayers aged 50 and over will have a $35,000 cap.
Tax on Pension Earnings – Scrapped
A key measure affecting superannuation which was abandoned was the proposal which would have taxed people’s superannuation pension earnings above $100,000 in the pension phase. This measure was due to start on 1 July 2014 and would have applied to all existing superannuation investments.
This proposal to tax pension earnings was going to be very complex and difficult to administer for superannuation funds. In light of this, the new Coalition Government chose not to proceed with this measure.
Excess Contributions Tax – Retained
The new Excess Contribution Tax (ECT) regime for concessional contributions will proceed as announced by the previous Government. This will allow taxpayers that have exceeded their concessional contribution cap after 1 July 2013 to withdraw the excess contribution from their superannuation fund with the excess contribution being taxed at the taxpayer’s marginal rate.
Low Income Superannuation Contribution – Scrapped
The Government confirmed that it will repeal the Low Income Superannuation Contribution (LISC). The LISC was a government contribution to people earning under $37,000 per year that ensured that they would not pay more tax on their compulsory superannuation contributions than they do on their income. This contribution will no longer be available from the 2013-14 income year and onwards.
Further announcements are expected and as always we will keep you informed. Should you have any queries please contact us.