Straight to content

No super surprises

Back to front page

There was initially some speculation that superannuation could be in the firing line this year, particularly the tax concessions for high-income earners. It was therefore somewhat of a relief that the changes to superannuation in this year’s Budget reflected earlier announcements.

Increase in the superannuation guarantee contributions rate

From 1 July 2013, the superannuation guarantee (SG) rate will increase from 9% to 9.25%. This is the first in a series of rises that will see the SG reach 12% by 1 July 2019.

Increased concessional cap

The government has abandoned its plan to increase the cap on concessional superannuation contributions to $50,000 for people aged 50 or older with total super balances below $500,000.

Instead, the government will lift the cap on concessional contributions to $35,000 from 1 July 2013, for people aged 60 and over, and for those aged 50 and over from 1 July 2014. Draft legislation to enact these changes is currently before Parliament.

This higher cap is unindexed, which means that it is effectively a temporary measure. The regular concessional contributions cap (currently $25,000) is expected to reach $35,000 by 1 July 2018.

Additional tax on concessional contributions for high-income earners

A government announcement yet to be enacted is a higher concessional contributions tax for individuals with an annual adjusted taxable income (ATI) in excess of $300,000.

The ATI for this rule is defined as taxable income, plus concessional contributions (within the cap), plus reportable fringe benefits, plus total net investment losses. The scope of this definition makes it difficult to structure remuneration packages to reduce the effect of this tax.

A 15% tax will apply to concessional contributions made within the relevant cap, in additional to the standard 15% levied. If an individual’s income is less than $300,000 before concessional contributions, but over this limit when their concessional contributions are taken into account, then only that part of the contributions in excess of the threshold will be subject to the additional tax.

Example:  Brian receives an income of $290,000, as well as $25,000 in concessional superannuation contributions. This takes his combined income to $315,000. His entire concessional contribution will be subject to the standard 15% contributions tax ($3,750), and the $15,000 that takes him over the $300,000 threshold will be subject to an additional 15% tax ($2,250). This means that Brian’s concessional contributions will attract a total of $6,000 tax.

Changes to the treatment of excess concessional contributions

Individuals will be permitted to withdraw any excess concessional contributions made to their superannuation fund from 1 July 2013. These excess contributions will be taxed at the individual’s actual marginal tax rate, plus an interest charge.

Back to front page