On Wednesday 6 November 2013, the Treasurer, the Hon Joe Hockey MP, and the Assistant Treasurer, Senator the Hon Arthur Sinodinos AO, announced the Government’s decision to abandon some of the previous Government’s tax and superannuation proposals. The announcement also indicated which of the former Government’s unlegislated proposals the new Coalition Government would proceed with.
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.
Also, the Government confirmed that it will repeal 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 and onwards.
An important change to superannuation which was not changed 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 2013-14. 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.
Finally, the new Excess Contribution Tax 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.
If you think that any of these changes may apply to you or affect your superannuation, and wish to seek further clarification on the potential impact they may have on your retirement strategy, please give me a call to arrange a time to meet and discuss this further.