24 Apr Reforms to the Superannuation System
The government has announced recently about the possible changes to the superannuation system. Note, however, that these will have to go through the normal political process first before they finally become a law.
Here’s a summary of the said reforms:
Superannuation income streams
- The tax-free status of retirement phase earnings remains but the limit is now up to $100,000 for each member. Anything in excess of $100,000 will be taxed at a rate of 15%.
- For notional earnings in defined benefit schemes, the same treatment will be applied.
- Assets acquired after July 1, 2014 will be subjected to a capital gains tax. Meanwhile for those bought before July 1, 2014, special arrangements will apply.
- Tax treatment of withdrawals won’t be affected by these reforms.
- An unindexed $35,000 concessional cap will replace the $50,000 cap linked to super balances below $500,000. This will apply to all members who are 60 years old and above beginning July 1, 2013. For those individuals aged 50 and above, this will be effective starting July 1, 2014.
Excess contributions tax
- Regardless of the members’ income or the cause of breach, changes to the operation of excess contributions tax with excess concessional contributions will be included in their taxable income and will be taxed based on marginal tax rate. Members, however, do have the option to either pay the tax bill from their own savings or from their superannuation fund.
- Transfer of small lost accounts to the ATO as unclaimed money will have an extension. The $2, 000 threshold will increase to $2,500 beginning December 31, 2015 and then after one year, threshold will be at $3,000.
- Beginning July 1, 2014, superannuation pension status will be extended to deferred lifetime annuities.
- A Council of Superannuation Custodians will be created to ensure these reforms are in line with an agreed Charter of Superannuation Adequacy and Sustainability.
Again, these reforms are subject for approval. So, watch out for more updates.