The draft will bring forward the start date for a new higher concessional contributions cap of $35,000 for people aged 60 and over to 1 July 2013. Individuals 50 and over will be able to access the higher cap from 1 July 2014, the government stated.
“This means Australians reaching retirement age during the next financial year can contribute up to $10,000 more to their super at the concessional tax rate,” said minister for financial services and superannuation Bill Shorten.
Tom Garcia, chief executive officer of Australian Institute of Superannuation Trustees (AIST), told InvestorDaily that AIST is generally pleased Australians close to retirement are able to help boost their retirement savings when they’ve “probably got a greater ability to do so”.
However, Mr Garcia added AIST supported the $50,000 cap for people with a balance under $500,000, saying they weren’t convinced administration concerns that were put forward were “that bad”, particularly with the development of the SuperStream.
John Brogden, chief executive of the Financial Services Council (FSC), told InvestorDaily that this is an “important recognition” by the government that caps need to get to a more reasonable level.
Not all the government’s proposed changes made it into the current exposure draft – legislation is to be introduced separately which allows individuals to withdraw any excess concessional contributions made from 1 July 2013 from their superannuation fund without penalty.
“There’s a lot of uncertainty, and a lack of knowledge around what really happens with excess contributions tax (ECT), so this should simplify the process … A lot of people get caught unknowingly,” Mr Garcia said.
The government also announced it will tax excess concessional contributions at the individual’s marginal tax rate plus an interest charge, not the top marginal tax rate. Generally, concessional contributions that are in excess of the annual cap are effectively taxed at 46.5 per cent.
“This reform will ensure that individuals are taxed on excess concessional contributions in the same way as if they had received that money as salary or wages and had chosen to make a non-concessional contribution,” said Mr Shorten.
