2012 Federal Budget Superannuation Changes

A doubling in the superannuation contribution tax rate for those earning over $300,000 p.a. and a reduction of the concessional contributions cap for those aged 50 and over are among the main changes to superannuation delivered in the 2012 Federal Budget.

With these latest changes to superannuation it’s vital that you make any changes to your superannuation strategy before 1 July 2012. Making any changes before this date will ensure that you take into account the new measures proposed in this year’s Federal Budget, including:

Superannuation contributions tax doubled to 30% for those earning more than $300,000

Those individuals with an income greater than $300,000 p.a. will have to pay a 30% superannuation contributions tax from 1 July 2012.

‘Income’ means taxable income, concessional superannuation contributions, adjusted fringe benefits, total net investment loss, target foreign income, tax-free government pensions and benefits, less child support.
If an individuals income, less concessional superannuation contributions, is less than $300,000 p.a., but the inclusion of their concessional superannuation contributions pushes their income over the $300,000 threshold, the higher rate of tax will only apply to the portion of contributions that are in excess of the threshold.

For example,

An individual has an annual income, less their concessional superannuation contributions, of $290,000.
Their annual concessional superannuation contributions are $20,000, taking their total income to $310,000.

Under the new tax guidelines, the 30% contributions tax will only be applied to $10,000 of their contributions.

The higher contributions tax will not apply to concessional contributions which exceed the concessional contributions cap, as they are effectively taxed at the top marginal tax rate.
The 15% tax on earnings within superannuation (and tax exemption for assets supporting pension payments), will not be affected by this change.

Reduction of the concessional contributions cap for those aged 50 and over

The Government has postponed the continuation of the increased concessional contributions cap for those aged 50 and over, reducing the amount that an individual can contribute to their superannuation from $50,000 to $25,000.

As of 1 July 2012 a $25, 000 concessional contributions cap will apply to all individuals, with the proposed increased cap for those aged 50 and over to be deferred until 1 July 2014.

Superannuation Contribution Rebate for low income earners

From 1 July 2012 the Superannuation Contribution Rebate will apply for those people earning a taxable income of less than $37,000, entitling them to a rebate of contributions tax of up to $500 into their account.

The rebate will effectively reduce their contributions tax to 0% for employer contributions up to $3,300.
Those eligible for this rebate can continue to receive the Government’s co-contribution of $500 p.a., meaning that they will receive a total of $1,000 in extra superannuation from both schemes.

In light of these changes to superannuation, if you would like to amend your superannuation to account for these proposed measures it is advised to do so before 1 July 2012. Call us on 1300 135 205 to discuss you superannuation options with one of our friendly advisors.

May 2012