Low-income earners would benefit from the tax changes to superannuation contributions, particularly those who were close to retirement, Dixon Advisory executive chairman Daryl Dixon said yesterday.
Those with an income less than the annual tax-free level of $20,452 were exempt from the 15 per cent contributions tax on employer superannuation benefits paid, Dixon said.
Earnings above $37,000 carry a 35.5 per cent tax rate.
Legislation was amended to refund contribution tax payments up to a maximum of $500 annually to taxpayers with adjusted taxable incomes not exceeding $37,000 per year.
“So there is a 20 per cent saving from having your money go into super,” Dixon told InvestorDaily.
“In the past, low-income earners really didn’t get any benefit from putting money into super; that’s all changed.
“So really, you could get $20,452 and have another $15,000 go into super and pay no tax.”
Increasing super contributions is more attractive for the older age groups with immediate or early access to super benefits.
“For example, older workers earning less than $37,000 annually can now avoid paying any income tax by receiving $20,452 annually as tax-free wage income with the balance or their earnings paid as compulsory and salary sacrifice super,” Dixon said.
The younger generation face the difficulty of having that super contribution tied up until they are 60.
“So they’ve got to have an income of less than $37,000 to have a totally tax-free income. I don’t think the government fully realise what they’ve done,” Dixon said.
“Overall it’s a positive change. It does give an advantage for people who are switched on to look at their saving strategies and work out their tax effectively.”
