Thursday, 11 April 2013

Bantacs Latest Changes to Superannuation

Latest Changes to Superannuation
Currently if a superannuation fund is in pension phase any income on its investments are tax free and it remains tax free when paid out to members. 

Starting on 1st July, 2014 the government will claw back some of this tax concession for the big end of town. When the superannuation fund earnings of an individual member exceed $100,000 in a financial year the excess will be taxed at 15%. 

The $100,000 threshold will be index to CPI increase in $10,000 intervals.

 The tax will not apply to capital gains on assets purchased before 5th April, 2013 for 10 years ie 2024. It is estimated this will only affect 16,000 superannuation fund members. 

There will be no further taxing of this excess when it is paid to the member over 60 years of age.
Stay tuned for more detail as it becomes available but it would seem that members in this situation should take advantage of the ability to split their superannuation with their spouse. 

Before you start thinking that this is a reason why you should not invest in superannuation consider that once the fund is in pension phase the member is entitled to take the money out so at worse they will be in the position they would have been in if they had not utilised superannuation but during the accumulation stage and to date they have received tax concessions. 

But they will not take their money out of the superannuation fund because it is still a tax haven for them, just a little less so.

From 1 July 2013 the concessional superannuation contributions cap will increase from $25,000 to $35,000 for people over 60 years of age

From 1 July 2014 the concessional superannuation contributions cap will increase from $25,000 to $35,000 for people over 50 years of age

Taxpayers who have exceeded their contribution cap, from 1st July, 2013, will have the option of withdrawing the excess from the fund to be taxed at their marginal tax rate plus a shortfall interest charge.

Note all of the above is proposed, not legislation yet. The following has been passed.

From 1 July 2012, individuals with income greater than $300,000 had the tax concession on their contributions reduced from 30% to 15%. As people on $300,000 a year are in the 45% tax bracket this means their superannuation will be taxed at 30% (45% - 15%)

The definition of 'income' for the purpose of this measure will include taxable income, reportable employer superannuation contributions, adjusted fringe benefits, total net investment loss, target foreign income, tax-free government pensions and benefits, less child support. 

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