Proposed Changes to Superannuation

The tax exemption for earnings on assets providing superannuation income streams will be capped at $100,000 from July 1, 2014 and earnings in excess of this will be taxed at 15%, federal treasurer Wayne Swan announced today. Treasury estimates that this will affect 0.4 per cent of or 16,000 of Australia’s total projected retirees in that year.

This  would affect those with generous defined benefit schemes (including politicians) or those with $2 million dollars or more in their superannuation funds if you assume a conservative five per cent rate of return.

The changes however may not be legislated before the federal election and Tony Abbot has vowed to “fight ferociously” to block the changes so it is far from certain that they will make it into action.

Other changes and items announced by Wayne Swan today included:

  • A bill is about to be introduced to parliament to increase from 15 to 30 per cent the superannuation contributions tax for people earning more than $300,000 per year
  • The $100,000 tax free threshold (indexed to CPI) will only increase in $10,000 increments
  • The tax treatment of withdrawals will remain tax-free for those age 60 and over
  • An increase in the concessional contributions cap to $35,000 (unindexed) for people age 60 and over from July 1, 2013 and for people age 50 and over from July 1, 2014
  • Excess contribution tax will now be taxed at the individual’s marginal tax rate plus an interest charge to reflect the delay in collecting tax on excess contributions compared to income tax
  • A Council of Super Custodians will be established to ensure that any future changes are consistent with an agreed Charter of Superannuation Adequacy and Sustainability.

For more information or advice specific to your situation, please contact us for details.

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