Last night the government handed down its 2012 Federal Budget. Below are the main changes affecting superannuation. For a complete run down of the changes that may affect you, read The 2012 ‘Robin Hood’ Federal Budget article from The Gym.
Keep in mind that the changes are only proposals and won't take effect until they're passed by parliament.
Super tax concessions reduced for people earning over $300,000 pa
The government will double the super contributions tax to 30% for people earning over $300,000 pa. The government argues that the current 15% flat tax on contributions provides very high earners with a bigger tax concession than those on lower marginal tax rates. This measure will bring the tax concessions of very high income earners in line with the concession received by average-income earners.
Before-tax super contributions will be included in the $300,000 income threshold. If a person's before-tax super contributions pushes their income above $300,000, the higher contributions tax will only apply to the contributions above the threshold.
This measure will affect less than 1.2% of people contributing to super.
The government previously announced that from 1 July 2012, people aged 50 and over with less than $500,000 in super would be able to contribute up to $50,000 before-tax into super, rather than the $25,000 pa limit that applies to everyone else. However, due to the cost and complexity of implementing this measure, the start date for this measure has been deferred for two years until 1 July 2014, when changes to super fund reporting and systems would make implementation easier.
This means the $50,000 before-tax contribution cap that currently applies to people aged 50 and over will drop to $25,000 from 1 July 2012, and for 2012-13 and 2013-14 a flat before-tax contribution cap of $25,000 will apply to everyone.
This measure may affect older workers trying to top up their super.
Indexing of before-tax contribution cap deferred
The government has deferred any indexing of the $25,000 before-tax contribution cap until 2014-15.
From 1 July 2014 the government expects the general before-tax contribution cap to increase to $30,000 pa, while people aged 50 and over with less than $500,000 in super will have a higher before-tax contribution cap of $55,000 pa.
No tax on super contributions for low income earners
The government has confirmed that it will introduce the low income super contribution from 1 July 2012. The contribution of up to $500 for people earning less than $37,000 pa will effectively remove the 15% before-tax contribution tax. The contribution will be paid to the eligible person's super fund.
This means low income earners won't pay tax on their super contributions.
Compulsory employer super contributions to rise to 12% by 2019-20
The government has confirmed it'll gradually lift the rate of compulsory employer super contributions from 9% to to 12% by 2019-20.
The 2012 ‘Robin Hood’ Federal BudgetRead the full Federal Budget article from The Gym
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