The government has announced proposed changes to Superannuation recently so this is a brief overview of the major proposed changes.
- Taxing earnings in pension phase that exceed $100,000 per annum
Currently superannuation money in pension phase attracts 0% tax on earnings the proposal here is to tax earnings over $100,000 at 15% the same rate that applies to Superannuation in accumulation phase.
- Increasing the Concessional contributions cap
The changes here are people age over 60 can contribute up to $35,000 without breach from 1 July 2013 and this increase will extend to people over age 50 from 1 July 2014.
- Improvements to the excess contributions tax regime from 1 July 2013
Currently a breach of the concessional contributions cap attracts tax at the highest marginal rate (15% contributions tax and a further 31.5% penalty).
The proposal is to allow individuals to withdraw any excess concessional contributions from super and instead tax them at their marginal rates plus an interest rate charge.
- Deeming of Account Based Pensions under the social security income test
Currently monies in pension phase i.e Account Based Pensions attract favourable treatment under the Centrelink means testing rules for the income test.
The proposals are that from July 2015 the favourable treatment will cease and instead the normal deeming rules will apply. All products held by pensioners before 1 July 2015 are to be grandfathered.
- Increasing the balance threshold below which lost super must be transferred to the ATO
The balance for inactive Super funds and uncontacable members required to be transferred to the ATO is to increase to $2,500 by December 2015 and to $3,000 by December 2016.
- Establishing a Council of Superannuation Custodians
A Council of Superannuation Custodians will be established to ensure that any future changes are consistent with an agreed Charter of Superannuation Adequacy and Sustainability.