The Budget contained little new superannuation news, instead re-stating measures already announced by the Government on 5 April 2013 including:
Changes to the Concessional Contributions Cap
The Government proposes to change the concessional contribution caps so that taxpayers aged 60 and over will have a $35,000 cap from 1 July 2013, while Taxpayers aged 50 and over will have a $35,000 cap from 1 July 2014. For remaining taxpayers the cap will remain at $25,000. The Government’s previous plan to have a $50,000 concessional cap for individuals aged 50 and over with less than $500,000 in superannuation has been permanently scrapped.
Excess Concessional Contributions Tax
From 1 July 2013 individuals will be able to withdraw concessional contributions above the cap (currently $25,000). Withdrawals will be taxed at the individual’s marginal rate plus an interest charge instead of at the top marginal tax rate of 46.5%. It is not clear if the excess concessional contribution will still be counted towards non-concessional contribution caps. On a practical level the proposal may provide some relief for individuals on tax rates less than the top marginal rate that make excess concessional contributions. However, for taxpayers on the top marginal tax rate the measure provides no relief.
Tax-free Pension Earnings Capped at $100,000
From 1 July 2014, earnings on assets supporting income streams above $100,000 per year will be taxed at the rate of 15 percent. Currently all earnings from assets supporting superannuation income streams are tax free.
The following transitional arrangements will apply for capital gains on assets purchased before 1 July 2014:
- For assets the Fund held at 5 April 2013 only the capital gains that accrue after 1 July 2024 will be counted;
- For assets purchased between 5 April 2013 and 30 June 2014 inclusive, the Trustee must include the lower of the total gain or the gain accrued after 1 July 2014; and
- For assets purchased from 1 July 2014 the entire gain will be included.
All capital gains included in the above measures will be taxed at 10%.
Other proposed superannuation reforms previously announced on 5 April 2013 include:
Lost superannuation transfers - the account balance threshold above which lost and inactive superannuation accounts must be transferred to the Tax Office will be increased from $2,000 to $2,500 from 31 December 2015 (and to $3,000 from 31 December 2016).