Superannuation

What is new from 1 July 2014?

• Earnings on superannuation pensions and annuities of more than $100,000 annually will be taxed at 15 per cent, instead of being tax-free

  • At a rate of return of 5 per cent, the Government expects the change will only affect people with more than $2 million in superannuation assets.
  • Around 16,000 people will be affected by this reform, which will save around $350 million over the four-year forward estimates period.
  • The change will not apply at the accumulation stage.

What is new from 1 July 2013?

• Concessional contribution cap for aged 60 and over

  From 1 July 2013, people aged 60 and over will see increased concessional caps from $25,000 to $35,000. Excess concessional contributions will be taxed at the individual's marginal rate, plus an interest charge.

• Employer compulsory superannuation

  From 1 July 2013, the employer will need to:

  • increase the minimum rate for super guarantee payments on behalf of employees from 9% to 9.25%
  • start making super guarantee payments for employees aged 70 years or older, as the existing upper age limit will be removed.

  From 1 January 2014, Employers must pay default super to a MySuper authorised fund.

• Minimum annual payments for super income streams goes back to normal percentage.

  Refer to below table, the minimum % withdrawal is back to normal for 2013-14 year.

   

  Age	Minimum % withdrawal for the 2008-09, 2009-10 and 2010-11 years for certain pensions and annuities	Minimum % withdrawal for the 2011-12 and 2012-13 years for certain pensions and annuities	Minimum % withdrawal (in all other cases)
  Under 65	2%	3%	4%
  65-74	2.5%	3.75%	5%
  75-79	3%	4.5%	6%
  80-84	3.5%	5.25%	7%
  85-89	4.5%	6.75%	9%
  90-94	5.5%	8.25%	11%
  95 or more	7%	10.5%	14%

  
  

  What if a trustee fails to meet the minimum pension requirements under the SIS Regulations?

  If a fund fails to meet the minimum pension payment requirements for an account-based pension in an income year, the super income stream will have been taken to have ceased at the start of that income year for income tax purposes.

  From the start of the income year the account is no longer supporting a super income stream and any payments made during the year will be super lump sums for both income tax and SIS Regulations purposes.

   

  This is the case even if the member remains entitled to receive a payment from the fund for the pension under the governing rules or under general trust law concepts.

   

  This means the fund will not be entitled to treat income or capital gains as exempt current pension income for the year, which means there is no tax free treatment for the pension account.

  
  

• Superannuation auto-consolidation

  From January 2014, ATO will facilitate the auto-consolidation of accounts with low balances by providing details of these accounts to members' current funds. The information will be provided annually and include:

  • details of lost accounts
  • accounts that have not received a contribution or rollover for two years with balances under $1,000
  • accounts in eligible rollover funds.

  Subject to a review by Treasury, the ATO and Australian Prudential Regulation Authority (APRA), the threshold for auto-consolidation of lost and inactive accounts will be increased to at least $10,000 in the second half of 2014.

Interesting facts

• In the 60-64 age group, half of women and a third of men are not working.
• Non-retired household occupants aged 50-54 had a debt to superannuation ratio of 91%, and even those nearing pension eligibility had a debt to superannuation ratio of 42%.
• Australian approaching retirement are viewing their accrued super as a lump sum that can be used to pay off debt upon retirement, rather than as an ongoing source of retirement income. With this perceived financial security, they are mortgaging the family home in order to help their children buy homes, or to fund overseas travel, retire early or simply to live a lifestyle their income cannot support.

- Extracted from In The Black CPA Australia December 2012

What is new in 2012-2013?

• Super co-contribution reduces from 1,000 to 500. (These proposed changes are not law because they have not been passed by parliament.)
• Super contributions for income earners over 300,000 to be taxed 30% rather than 15%
• Super deductible employer contribution limit drops from 50,000 to 25,000 for over 50’s

• Low income super contribution

  The low income super contribution (LISC) is a government payment to help low income earners save for their retirement.

  From the 2012-13 income year, your LISC is 15% of the concessional (before tax) super contributions you or your employer make. The maximum payment you can receive for a financial year is $500 and the minimum is $20.

  You are eligible for a LISC if:

  • you have concessional contributions for the year made to a complying super fund
  • your adjusted taxable income does not exceed $37,000 (if you are required to lodge a tax return)
  • you are not a holder of a temporary resident visa (New Zealand citizens in Australia do not hold temporary resident visas and are therefore eligible for the payment)
  • 10% or more of your total income is derived from business or employment
  • the amount payable is $20 or more.