By Justin Inskip, Director, Westlawn Business Services
The start of a new financial year brings further changes to the rules governing your superannuation.
Here are some of the key changes taking effect from 1 July 2013.
Super Guarantee on the rise
The change that will affect most Australians’ super is the increase in the minimum employer superannuation guarantee (SG) from 9% to 9.25% starting 1 July 2013. This is the first in a series of increases that will see the SG gradually rise to 12% by 2019-2020.
Where an employee is already salary sacrificing more than 9.25% of their ordinary time earnings as at 1 July 2013, the employer will technically already be complying with the higher SG rate and therefore not obliged to make additional super contributions at the increased rate. However, an industrial award or agreement may require an employer to make super contributions above the standard charge percentage.
If you’re already salary sacrificing above the 9.25% rate (for 2013-14) you should review your employment agreements and salary sacrifice arrangements to clarify that your employer is liable for all payments under the superannuation guarantee regime (at the increased SG rate for the relevant year) on the total remuneration agreed.
Employers are obliged by law to contribute up to a total maximum of $17,774.80 for 2013-14 (9.25% of $192,160). Therefore, SG contributions for employees with earnings above $192,160 from one employer will have already used up $17,774.80 of their $25,000 concessional contribution cap (or $35,000 proposed cap for those 60 and over from 2013-14). This leaves very little room for any additional salary sacrificing to super.
Changes to concessional caps
A higher concessional contributions cap of $35,000 is proposed for people aged 60 or over from 1 July 2013. Concessional contributions are those that receive special tax treatment and include before-tax contributions such as employer contributions, salary sacrifice contributions and tax-deductible contributions by an individual. The general concessional cap is $25,000.
From 1 July 2014, the $35,000 concessional cap will also apply to people aged 50 to 59
Additional 15% tax for high income earners
From the 2012-13 financial year, individuals earning above the “high income threshold” of $300,000 will be hit with an additional 15% tax on their “low tax contributions” (essentially concessional contributions, including employer SG contributions) under proposed legislation. The effective contributions tax will be doubled to 30% for concessional contributions made on behalf of individuals earning above $300,000.
SMSF supervisory levy
If you have a self managed super fund (SMSF), payment of the SMSF supervisory levy will be brought forward so it’s levied and collected in the same financial year rather than the financial year to which the SMSF annual return (SAR) relates.
The changes affect levy payments for the financial year ended 30 June 2012 and onward. This timing change will be phased in over 2 years to give SMSFs time to adjust. Transitional provisions apply to the levy for the 2013-14 tax year so that the levy is payable in 2 instalments.
Additionally, the annual SMSF levy will increase from $191 (for 2012–13) to $259 from 2013–14 onwards.
Disclaimer Westlawn 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. Tax articles are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.