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Federal Budget Update – Changes to Superannuation

Article By Adam Hurwood | | Accounting & Tax
No Extension of Draw-Down Relief for Income Streams
Proposed from 1 July 2013

Conspicuous by its absence, the Government has not announced any further extension of the minimum draw-down relief for superannuation income streams. In recognition of the constrained markets at the time, over the last few years the Government has granted relief on minimum pension payment draw-downs, with a 25% reduction applying to the current financial year.

In the absence of any subsequent announcements, minimum pension draw-downs will return to their standard level from 1 July 2013 as shown in the following table:

Higher Tax on Concessional Contributions for High Income Earners

Proposed from 1 July 2012

Previously announced in the 2012 Budget and recently the subject of draft legislation released for consultation, individuals with “total income” in excess of $300,000 will be subject to an additional 15% tax on their concessional contributions to super up to their relevant concessional contribution cap limit.

In this year‟s Budget, the Government has announced some minor technical amendments to the measure (and addressed in the draft legislation). These minor amendments include:

  • Exempting certain employer contributions for Federal Judges sitting on or after 1 July 2012 and certain employer contributions made to constitutionally protected funds
  • Amending the definition of “total income” to that used for calculating liability for the Medicare levy surcharge.

The draft legislation released for comment has also confirmed that this additional tax will be collected via a mechanism similar to that currently applying to excess contributions tax.

It is important to be aware that there is potential for this additional tax to apply to the higher concessional cap of $35,000 proposed for those aged 60 and above from 1 July 2013 and those aged 50 and above from 1 July 2014.

Additional Reforms for Lost Super

Proposed from 31 December 2015

In the 2012/13 Mid Year Economic & Fiscal Outlook (released in October 2012), the Government announced that the account balance threshold for inactive or uncontactable (i.e. lost) members required to be transferred to the ATO would increase to $2,000 and interest would be paid on these accounts at a rate equivalent to the CPI inflation.

The Government has announced it will now increase the threshold to $2,500 from 31 December 2015 and then to $3,000 from 31 December 2016.

This change will increase the number of accounts transferred to the ATO, but may assist in consolidating more lost accounts and aiding clients to find their lost super.

If you feel that any of these proposed changes will have an adverse impact on your superannuation savings, then we urge you to come in and see us to look at strategies positioned to minimising that impact.