Proposed Superannuation changes
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The Federal Government has announced a series of measures to promote the sustainability of the superannuation system.
The changes announced are both negative and positive to Australians approaching retirement.
A tax exemption on superannuation earnings supporting pensions and annuities will be capped at $100,000, and anything above that level taxed at a rate of 15 per cent, the federal government has announced.
Under existing arrangements, all earnings on assets supporting income streams (superannuation pensions and annuities) are tax-free, in contrast to earnings in the accumulation phase of superannuation, which are taxed at 15 per cent.
Withdrawals will continue to remain tax-free for those aged 60 and over, and face the existing tax rates for those aged under 60.
Federal Treasurer Wayne Swan revealed on Friday the following:
- Any Australian earning above $100,000 in interest will be taxed at 15%
This will impact about 16,000 wealthy Australians would be negatively impacted by the superannuation changes.
The tax will be imposed for those with super accounts with a balance over $2 million in their super accounts.
They will receive a tax free benefit up to $100,000 in earnings, only earnings above that will attract a 15% tax rate.
On an more positive note, families will benefit from another change to superannuation laws.
From July 1 this year, Australian’s over the age of 60 will be able to deposit into their super an extra $10,000 due to the concessional cap increasing from $25,000 to $35,000
- July 1 next year, the extra $10,000 will apply to those who are 50 and over
Wayne Swan was quoted “Why should someone who has millions of dollars in a superannuation account pay no tax on their earnings, while someone on $80,000 a year pays a marginal tax rate of 37 cents in the dollar on every additional dollar they earn?”
The Government has put in place a number of initiatives through the Australian Taxation Office (ATO) to help reunite members with lost super accounts.
The government announced that for the first time, interest will be paid from 1 July 2013 on all lost superannuation accounts reclaimed from the ATO (at a rate equivalent to Consumer Price Index inflation). It also announced that the account balance threshold below which inactive accounts, and accounts of uncontactable members, are required to be transferred to the ATO will be increased to $2,000, to ensure they are properly protected from being eroded by fees and charges.
The Government will further increase the account balance threshold to $2,500 from 31 December 2015, and to $3,000 from 31 December 2016. Treasury analysis shows that:
- A 20-year-old with $3,000 in an inactive superannuation account will be able to claim around $3,394 from the ATO after five years, a boost to their superannuation savings of around $671 compared with what the balance would be if their account remained with their fund.
- A 30-year-old with $3,000 in an inactive superannuation account will be able to claim around $3,394 from the ATO after five years, a boost to their superannuation savings of around $898 compared with what the balance would be if their account remained with their fund.
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