Summary of the latest superannuation news

Now that we have recovered from elections and politics (to a certain extent!) and have a newly-elected government, I thought I’d round up the latest news relating to superannuation and self-managed super, as well as summarise the relevant information for the current financial year.

  1.  Reduced tax concession for very high income earners

From 1 July 2012, individuals with more than $300,000 in ‘income for surcharge purposes’ will have the deduction for their superannuation contributions lowered from 45% to 30%. The ATO will begin assessing this tax from January 2014, as the 2013 financial year tax returns are lodged. This tax will need to be paid 21 days after receipt of the assessment.

Yes, this tax is levied on the individual and reverses the higher tax benefit that they are entitled to by being on the highest marginal rate of tax.

  1.  Tax on super earnings in pension phase for income over $100,000

Despite this being a Labor government measure, no change has been made yet to this proposed policy in the wake of a new Coalition government. From 1 July next year, earnings for those in pension phase exceeding $100,000 will be taxed at 15% on the excess, where previously it was all tax free. If there are any changes to this proposed policy, we will update you.

  1.  Parental Leave Scheme Levy and Franking Credits

I had a couple of queries on this as it appeared in the media leading up to the election so I thought I would clarify. In order to fund the Coalition’s paid parental scheme, a tax levy of 1.5% will be charged to companies who have taxable income of more than $5m, in conjunction with a reduction in company tax at the same rate. This sounds great and it brings us into line with many other countries already providing paid parental leave, and companies won’t be paying more tax overall; however it creates a significant line item in the new government’s costs.

The issue with this 1.5% levy is that, unlike standard company tax, it won’t qualify for franking credits. While companies will still be paying tax at 30%, franking credits will only then be issued to shareholders at a rate of 28.5%. We know that many super funds--particularly retirees--rely on franking credits as part of a source of income, so this was a concern for many. Again, if there are any updates we will inform you.

Super for everyone:

  1.  Low income super contribution

The low income super contribution is for people who have an adjusted taxable income of $37,000 or less per year. People who are eligible will receive a super payment that is 15% of their concessional contributions, including salary sacrifice payments, up to $500 per year. Eligibility is worked out automatically by the ATO and will be paid directly to your super fund (including SMSFs).

  1. Super guarantee

The super guarantee is being slowly increased. From 1 July 2013 it is 9.25%, and it will continue to rise up to 12% from 1 July 2019. They are very small, incremental increases each year of no more than 0.5%.

  1. Super co-contribution

The super co-contribution is still being paid out for the 2014 financial year. If your income is less than $33,516, you will have a maximum entitlement of $500. This entitlement decreases until you reach the upper income threshold of $48,516, after which you are no longer entitled to the co-contribution.

Super for SMSF trustees:

  1.  Concessional contributions cap

A few changes have been made to the concessional contributions cap for the 2014 financial year. If you are turning 60 in the financial year ending 30 June 2014, you are now eligible for a concessional contributions cap of $35,000. To make it easier, I have summarised the caps for both 2014 and 2015 in the table below. The non-concessional contributions cap remains at $150,000.

Income year

Amount of general cap

Cap for those aged 59 years or over on 30 June 2013

Cap for those aged 49 years or over on 30 June 2014

2014–15

 

$35,000

$35,000

2013–14

$25,000

$35,000

$25,000

  1. Minimum pension payments for 2014

Just a reminder – the minimum pension payments for the 2014 financial year are back at normal levels (i.e. they don’t have the reduction applied in previous years that were granted as a result of the GFC). See below for the minimum pension percentages, depending upon a member’s age.

Age

Percentage of account balance

 

2011-12

2012-13

2013-14

onwards

Under 65

3%

4%

65-74

3.75%

5%

75-79

4.5%

6%

80-84

5.25%

7%

85-89

6.75%

9%

90-94

8.25%

11%

95 or more

10.5%

14%

 

  1. 2013 SMSF Annual ATO Levy

For the 2013 financial year, the ATO Levy for self-managed super funds is being brought into line with all other superannuation funds in that their levies are paid for the current year, not for the previous year. This is being phased in over two years. When self-managed super funds lodge their 2013 annual tax return, the levy will be $321.

  1. Off Market Transfers of Shares

I previously mentioned this but it’s worth reiterating – the proposed ban for the off market transfer of shares is NOT going ahead. You can continue to transfer and contribute shares that you own to your self-managed super fund. 


Learn how Rivkin Super can help your SMSF. Click here. 

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