Deferral of superannuation guarantee increase
The government has followed through on their pre-election promises and made announcement that they will abolish or change some of the superannuation policies/ measures introduced by the previous Labor government.
Along with the removal of the carbon tax, the coalition government has also commenced working on removing these tax related matters on superannuation:
1. Deferral of the SG increase (to 12%)
The government has also recently announced that they will defer the gradual increase of the superannuation guarantee (SG) rate by 2 years. The current SG rate is 9.25%, increasing to 9.5% in 2014 and after that, increasing by 0.5% each year hereafter until it reaches 12% in 2019.
Under the proposed changes announced by the new government, the SG rate will not reach 12% until 2021. This means the current rate will remain at 9.25% until 2015, and then increasing by 0.5% each year until it reaches 12% in 2021.
2. Low Income Superannuation Contribution (LISC)
This incentive will be removed/repealed from 1 July 2013. Under this measure, low income earners don’t have to pay tax on contribution. This is a 15% contributions tax levied on superannuation guarantee (SG) contributions. Essentially, if you earn less than $37K pa, you don’t have to pay the contributions tax on SG contributions made by your employer; a saving of up to $500 a year as a result of the Australian Taxation Office (ATO) returning this tax to your super fund. This incentive was introduced by the Labor government from 1 July 2012.It was funded with the expected revenue from Minerals Resources Rent Tax (carbon tax related).
Now that the carbon tax is being abolished, there is no money to fund this incentive. However, the government has mentioned that they will revisit new incentives for low income earners when the budget is back in surplus.
For more information on LISC, see my previous articles: What is the Low Income Superannuation Contribution? dated 10 September 2012.
3. Tax on investment earnings over $100K on income streams
In April 2013, the Labor government introduced a rule that would cap the tax-free earnings on income streams at $100,000. Under this proposed new rule, earnings on income stream accounts above $100,000 would be taxed at 15%. Previously, all earnings on income streams were not subject to tax.
On 6 November 2013, the government announced that they would not proceed with this proposed new tax, claiming that it is too complex and unworkable. This will make the 16,000 people who receive investment earnings over $100K a year, very happy.
For more information on this measure, see my previous article: Changes to superannuation announced, dated 9 April 2013.