T The Proposed changes to Superannuation announced by Wane Swan on April 2013
1.From July 1 2014, earnings on superannuation pensions and annuities of more than $100,000 annually will be taxed at 15 per cent, instead of being tax-free. Superannuation earnings below $100,000 a year will remain tax-free and this threshold will be indexed to the Consumer Price Index. The Government says around 16,000 people will be affected by this reform, which will save around $350 million over the four-year forward estimates period.
2. 2. Members of defined benefit funds, which includes federal politicians, who have more than $100000 notional earnings will be hit with a 15% tax on each dollar over that amount.
3. 3. From 1 July 2013, people aged 60 and over will see increased concessional caps from $25,000 to $35,000. Excess concessional contributions will be taxed at the individual’s marginal rate, plus an interest charge. The Government says this will mean individuals are taxed on excess concessional contributions in the same way as if they had received that money as salary or wages. The cap will be introduced for over 60s by July 2013, while those aged over 50 can access the cap by July 2014. The general cap will reach $35,000 by 2018.
4. 4. The government will allow individuals to withdraw excess concessional contributions made from July 1 2013 from the superannuation fund. Also, the government will tax excess concessional contributions at the marginal tax rate, plus an interest charge.
5. 5. New changes will affect superannuation account-based income streams. Standard pension deeming arrangements will apply to new superannuation account-based income streams assed under the pension income test after January 2015. That is; People with superannuation account based income streams, to have investments treated, in the same way as dividends from shares, or interest from term deposits, when pension levels determined from 1st January 2015. All products held by pensioners before January 1, 2015 will be grandfathered indefinitely and continue to be assessed under the existing rules for the life of the product so no current pensioner will be affected, unless they choose to change products
6. 6. Deferred life time annuities, to be provided with same concessional tax treatment, that superannuation asset supporting income streams receive.
7. Increase in balance threshold inactive superannuation accounts can be transferred to the ATO from the current $2000 to $2500 from Decemeber 31st 2015 and $3000 from 31ST December 2016.
8. 7.The government will also create a “Council of Superannuation Custodians” to ensure future changes are consistent with the Charter of Superannuation Adequacy.
What is ‘Deferred Annuity ?
A type of annuity contract that delays payments of income, instalments or a lump sum until the investor elects to receive them. This type of annuity has two main phases, the savings phase in which you invest money into the account, and the income phase in which the plan is converted into an annuity and payments are received.
What is consumer price index?
An index of the variation in prices paid by typical consumers for retail goods and other items. A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased by households.
What is a Defined benefit funds?
A defined benefit fund is a super fund that pays a final super benefit based on a formula that takes into account your final salary and the number of years that you work for your company or government department.
What is a concessional contribution cap?
Superannuation contributions can be divided into two types — concessional (before-tax) and non-concessional (after-tax). Each type of super contribution is subject to a contributions cap. A contributions cap sets a limit on the amount of contributions you can make in any one year. If you exceed the cap, your excess contributions are likely to be subject to penalty tax.
What is an account based income stream?
An account based pension is an investment that lets you rollover your super money into an account held in your name in a super fund .You can only start an account based pension with money you hold in superannuation. The returns you make on your investments are added to your account, which pays you regular income payments. You can commence a pension once you have met a condition of release, such as reaching your preservation age.