Budget Wrap 2012 – Superannuation Changes

Posted on by Mark Fernandez

Our guest columnist Michael Moursellas from Macquarie Private Wealth expaalins to us the impacts of the new Federal Budget on superannuation. 

Contribution Tax Changes

As reported in the media prior to budget, from July 1 2012, individuals with income greater than $300,000 will be taxed at 30% on their superannuation contributions (SG and salary sacrifice). This is up from 15% and excluding Medicare levy.

The definition of ‘income’ for the purposes of this measure will include taxable income, concessional superannuation contributions, adjusted fringe benefits, total net investment loss, target foreign income, tax free government pensions & benefits, less child support.

While this has made employer superannuation contributions (including salary sacrifice) less attractive for individuals who fall into this category, it is still 15% less than the marginal tax rate of 45% they would pay on their salary.

Concessional Contributions Tax

Under the initial proposed higher concessional contribution cap measure, individuals aged 50 and over with superannuation balances below $500,000 would have been able to contribute up to $50,000 in concessional contributions. The Government will defer this start date by two years from 1 July 2012 to 1 July 2014.

The deferral means that for 2012-13 and 2013-14, all individuals will only be able to make concessional contributions of up to $25,000 per annum. In 2014-15 the concessional cap is expected to increase to $30,000 through indexation, and the higher cap (after the deferral period) would then commence at $55,000.

This has vast implications for superannuation members therefore super fund members aged 50 and over should be reviewing their concessional contributions prior to 30 June 2012 to take advantage of the current higher caps and for the following 2012-13 financial year to ensure they do not exceed their caps. It means individuals may need to consider making non concessional contributions if impacted by the cap reduction.  Those using the ‘transition to retirement’ strategy will also need to review their contributions and income payments.

Pension Draw Down Relief

The Government will phase out pension draw down relief that has been provided for the past three years. Minimum payment amounts for account based pensions, allocated and market linked pensions will be reduced by 25% in 2011-12 and will return to normal in 2012-13.

For example, from 2012-13, the minimum payment amount for a pensioner aged 65 and under will be 3% per annum of the account balance.

This is good news for those who receive enough from pension from their super funds as they won’t be required to draw down more income than needed. As a result they can keep more in the zero tax environment of pension superannuation. 

Tax-free super pension income to increase

People aged 55-59 will receive more tax-free income from a superannuation income/pension stream than they can in 2011-12. These increases result from the marginal tax rate, income threshold and Low Income Tax Offset changes.

If you would like more information on any of the above or how it impacts your personal financial situation, please contact Michael Moursellas on 9224 0831 or email michael.moursellas@macquarie.com

Macquarie Private Wealth’s services are provided by Macquarie Equities Limited ABN 41 002 574 923 (“MEL”) participant of Australian Securities Exchange Group, Australian financial services licence No. 237504, No 1, Shelley St, Sydney NSW 2000.  This information has been prepared by MEL and does not take into account your objectives, financial situation or needs. Before acting on this information you should consider whether it is appropriate to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.  MEL is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Cth), and MEL’s obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542. Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This information is not an offer or solicitation for the purchase of securities, units or investments unless expressly stated otherwise.
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