Just a quick update on some superannuation changes.
Superannuation – Maximum age for Superannuation Guarantee
The age limit for employees eligible to receive superannuation guarantee contributions is to be removed entirely effective from 1 July 2013.
Originally it was proposed to increase the age limit from 70 to 75, however the age limit will now be removed entirely.
As an aside, a superannuation fund can currently only accept contributions in respect of members who are aged under 75 (between 65 and 75, the work test must be met), unless the contribution is a “mandated employer contributions”. As SG contributions are mandated employer contributions, current superannuation legislation will allow for SG contributions to be made for people over 75.
However, unless the legislation is amended to increase the age limit at which superannuation funds can accept non-mandated employer contributions, it is unlikely that other employer contributions including those made under a salary sacrifice arrangement will be able to be made for those aged 75 and over.
Superannuation – Indexation of the concessional contribution caps
Currently the concessional contribution cap of $ 25,000 is indexed in $ 5,000 increments in accordance with the movement in Average Weekly Ordinary Times Earnings (AWOTE). When the concessional contribution cap was halved effective from 1 July 2009, the indexation base was reset.
The Government has announced that indexation will be paused for the 2013-14 financial year, thereby potentially deferring the increase of the concessional contribution cap to $ 30,000 by one year.
Superannuation – Account based pensions – minimum annual drawdown
The current 25% discount applying to the minimum drawdown required to be made from account based pensions will be continued for the 2012-13 financial year. This discount applies to all account based pensions including market linked income streams (term allocated pensions).
Superannuation Co-contribution – reduction
The Government co-contribution currently available to low income earners is to be further reduced from 1 July 2012. The matching rate (currently $ 1 for $ 1) will be reduced by 50% with the maximum co-contribution being $ 500 for people with incomes of up to $ 31,920. The co-contribution will phase out when income reaches $ 46,920.
Superannuation – low income superannuation contributions
The criteria surrounding eligibility to the low income superannuation contribution (refund of contributions tax for people earning less than $ 37,000) has been modified. The LISC will only be payable for individuals who derive 10% or more of their income from employment or for carrying on a business.