Government leaves super alone
14 May 2014
Superannuation has been left intact in the Budget, suggesting that this government is unlikely to make substantial changes in the tax arrangements.
Accountants PwC have detailed the changes:
"It is pleasing to see the Government resisted the temptation to change superannuation again in order to achieve short term gain. Superannuation should be considered as an integral part of comprehensive tax reform that can build a sustainable system to support the ageing population. Greater stability and a higher degree of consultation with industry and transparency prior to change is required to restore greaterconfidence in the system.
It is pleasing to see the increase in superannuation contribution caps although we still need much greater incentives for making contributions throughout a person’s life with more meaningful increases in contribution caps. We also need an ability to accumulate greater levels of superannuation at a time in life when there is higher disposable income available to do so and it is disappointing to see the delay of superannuation guarantee increases.
It is particularly pleasing to see a fairer approach to excess contributions tax. Any future change will need to ensure superannuation remains the most tax effective environment for many taxpayers to provide for income in their retirement. The combination of tax concessions applying to contributions and investment earnings, and the environment created while a superannuation pension is paid will need to continue to provide individuals with the ability to accumulate wealth in a significantly lower tax environment, compared with other alternatives. The core element of choice needs to be maintained so taxpayers determine the appropriate type superannuation fund including self- managed funds (SMSFs)."
The Budget includes a policy to enable individuals who inadvertently exceed the non-concessional contribution cap to withdraw the excess amount plus associated earnings from the fund. Non-concessional contributions are those made out of post- tax income. By choosing to withdraw excess non-concessional contributions the penalty tax will not apply. The refunded earnings will be taxed at the individual’s marginal rate of tax.
According to the AFR, the rise in contributions has been pushed out a year:
"The timetable for increasing the superannuation guarantee to 12 per cent will be pushed out by a year, a move blamed on the Senate’s refusal to legislate in favour of the current schedule for raising the level of compulsory contributions.
Finance Minister Mathias Cormann also revealed that the penalty regime for certain breaches of the excess contributions rules would be relaxed.
Treasurer Joe Hockey said on Tuesday that the super guarantee would rise to 9.5 per cent on July 1, and then be frozen at that level until June 2018.
From 2018 the level of compulsory contributions will rise by half of a percentage point a year, reaching the target 12 per cent in the 2023 financial year.
Mr Hockey blamed the decision on the failure of the Senate to agree to the current timetable of raising the super guarantee.
The government had been hoping to place a two-year moratorium on the super guarantee at the current level of 9.25 per cent. Under that timetable, the super guarantee would have reached 12 per cent by June 30, 2022."
Submit a comment