Superannuation - How do the proposed laws impact us?
The latest budgeting advice from Bills to Pay founder Kris Bondin, qualified CPA.
The federal government has announced a series of measures to promote the sustainability of the superannuation system.
The changes announced are both negative and positive to Australians approaching retirement.
How does this impact us and who will it impact the most?
In a nutshell, the changes will impact approximately 16,000 wealthy Australians, whom from July 1 this year will be obliged to pay a new tax of 15% for any earning they make over $100,000. The tax will be imposed to those who hold in excess of $2 million dollars in their super account. Therefore, any earnings up to $100,000 are tax free, the rest of the earnings about $100,000 is taxed at 15%.
Has there been any positive news out of the announcement?
Kris: Yes, there has been. At the present time, the maximum amount of money people can deposit in their superannuation account is $25,000 per annum. The new proposed change will allow Australian's over the age of 60 to deposit an extra $10,000 into their super accounts. This is called the concessional cap limit and will move from $25,000 to $35,000.
Further to that, from July 1 next year (2014), Australians aged 50 and over will also be eligible for the extra deposit of $10,000.
a) Lost Super
At present, the government holds onto super fund balances which are unclaimed on behalf of Australians via the ATO. For the first time, the government has stated that from 1 July this year (2013) all lost superannuation accounts reclaimed from the ATO will be paid interest at the rate equivalent to the Consumer Price Index Inflation rate (CPI). Also, the account balance of inactive accounts of un-contactable members will be increased to $2,000. These funds will then be transferred to the ATO to ensure that are properly protected from being eroded by fees and charges.
b) $500 government contribution for low income earners.
Starting from now, the Australian Government will put up to $500 extra into your super each year if you earn up to $37,000 a year. It’s called the low income super contribution. You don’t need to do anything to apply.
c) More compulsory Super for everyone:
The general law around super is that if you are over the age of 18 and are paid more than $450 (gross) in one calendar month, the employer must pay compulsory superannuation of 9% to the super fund. From Jul 1 this year, this minimum percentage will increase to 9.25% and over the next 7 years, increase to 12% starting from Jul 1 2019.
|1 July 2013||9.25%|
|1 July 2014||9.50%|
|1 July 2015||10%|
|1 July 2016||10.50%|
|1 July 2017||11%|
|1 July 2018||11.50%|
|1 July 2019||12%|
d) At present, your employer only needs to pay compulsory super up to the age of 70. From 1 July 2013, the upper age limit for paying super for an employee will be removed, so if you’re a mature age worker you can keep building your retirement savings. This means you may be eligible to get super from your employer if you’re 70 or over and still working.