TAX ALERT – NOVEMBER 2013
New Government Announcements: Superannuation Update
On 6 November 2013, the Treasurer, the Hon Joe Hockey MP, and the Assistant Treasurer, Senator the Hon Arthur Sinodinos AO, announced the new Coalition Government's decision to abandon some of the previous Labour Government's tax and superannuation proposals.
The announcement also indicated which of the former Labour Government's unlegislated proposals the new Coalition Government would proceed with.
Taxing Pension Earnings over $100,000 from 1 July 2014 - ABANDONED
A key measure affecting superannuation which was abandoned was the proposal which would have taxed people's superannuation pension earnings above $100,000 in the pension phase. This measure was due to start on 1 July 2014 and would have applied to all existing superannuation investments.
This proposal to tax pension earnings was going to be very complex and difficult to administer for superannuation funds. In light of this, the new Coalition Government chose not to proceed with this measure.
Low Income Superannuation Contribution Scheme - ABANDONED
Also, the Government confirmed that it will abandon the Low Income Superannuation Contribution (LISC). The LISC was a government contribution to people earning under $37,000 per year that ensured that they would not pay more tax on their compulsory superannuation contributions than they do on their income. This contribution will no longer be available from the 2013-14 income year onwards.
Increasing the Concessional Contributions Cap for Taxpayer's aged 60 and over in 2013-14 and 50 and over in 2014-15 – REMAINS UNCHANGED
An important change to superannuation which remains unchanged by the new Government's announcement was the increased concessional contribution cap for those aged 60 and over in 2013-14 and 50 and over in 2014-15. From 1 July 2013 taxpayers aged 60 and over will have a $35,000 cap, and, from 1 July 2014 taxpayers aged 50 and over will have a $35,000 cap.
Ability to Withdraw Excess Contributions – REMAINS UNCHANGED
Finally, the new Excess Contribution Tax (ECT) regime for concessional contributions will proceed as announced by the previous Government. This will allow taxpayers that have exceeded their concessional contribution cap after 1 July 2013 to withdraw the excess contribution from their superannuation fund with the excess contribution being taxed at the taxpayer's marginal rate.
Transfer of Lost member Accounts to the ATO – SUPPORTED & TO BE IMPLEMENTED
The Government has confirmed its intentions to proceed with increasing the thresholds for lost superannuation, where the lost member accounts are transferred to the ATO. The proposed increases to the thresholds, below which lost accounts are required to be transferred to the ATO, are from $2,000 to $4,000 from 31 December 2015, and then to $6,000 from 31 December 2016.
Please do not hesitate to contact your Lowe Lippmann advisor if you wish to discuss any of these matters further.