By Justin Inskip, Director, Westlawn Business Services 13 November 2013
On 6 November this year, the Treasurer announced which of the previous government’s unlegislated tax and superannuation proposals the Coalition would proceed with and which ones would be abandoned.
Here is a summary of the key changes from the announcement.
Proposed tax on pension earnings above $100,000
A key proposal of the previous government was to tax earnings above $100,000 in the pension phase. This was due to start on 1 July 2014 and would have applied to all existing superannuation investments. This proposal has now been abandoned as it would have been very complex and difficult for super funds to administer.
Low Income Superannuation Contribution (LISC)
The government confirmed that it will repeal the Low Income Superannuation Contribution (LISC). The LISC was a government contribution paid to those earning under $37,000 per year that ensured low income earners would not pay more tax on their compulsory super contributions than they pay on their income. This contribution will no longer be available from the 2013-14 income year.
Increased concessional contribution caps
The government will proceed with increasing the concessional contribution cap for those aged 60 and over in 2013-14 and for those aged 50 and over in 2014-15.
The $35,000 concessional contribution cap will apply to taxpayers aged 60 and over from 1 July 2013, and for taxpayers aged 50 and over from 1 July 2014.
Excess Contribution Tax
Finally, the new Excess Contribution Tax (ECT) regime for concessional contributions will proceed as announced by the previous government. This will allow taxpayers who’ve exceeded their concessional contribution cap after 1 July 2013 to withdraw the excess contribution from their super fund with the excess contribution taxed at their marginal tax rate.
Disclaimer Westlawn Business Services Pty Ltd provides this information for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers.
Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation.