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Major superannuation reforms announced

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On 5 April 2013, the Government announced the following major superannuation reforms:

  • tax-free pension earnings capped at $100,000 – the tax exemption for earnings on superannuation fund assets supporting income streams will be capped at $100,000 per annum per person from 1 July 2014. A tax rate of 15% will apply to fund earnings above $100,000 (to be indexed in $10,000 increments). Special arrangements will apply for capital gains on CGT assets purchased before 1 July 2014;

  • taxation of withdrawals unchanged – the tax-free status of withdrawals from superannuation for those aged 60 years and over will remain unchanged;

  • concessional contributions cap – a $35,000 concessional cap (not indexed) will apply for people aged 60 years and over from 1 July 2013 (or 1 July 2014 for people aged 50–59 years) instead of the general concessional cap of $25,000. (Note that on 6 May 2013, the Government released for public consultation draft legislation to implement the proposal. Comments are due by 13 May 2013.);

  • refund of excess concessional contributions – all individuals will be able to withdraw from their superannuation fund any excess concessional contributions made from 1 July 2013. The withdrawn excess contributions will be taxed at the individual’s marginal tax rate (plus an interest charge);

  • deeming rules for account-based pensions – the rules will be extended to ensure that superannuation account-based pension payments are assessed from 1 January 2015 for the purposes of the social security pension income test under the same rules that apply for other financial investments. Products held by pensioners before 1 January 2015 will be grandfathered indefinitely and continue to be assessed under the existing rules;

  • deferred lifetime annuities – from 1 July 2014, these will be granted the same concessional tax treatment that superannuation assets supporting income streams receive;

  • lost superannuation transfers to the ATO – the account balance threshold above which inactive accounts must be transferred to the ATO will be increased from $2,000 to $2,500 from 31 December 2015 (and to $3,000 from 31 December 2016); and

  • Council of Superannuation Custodians – this will be established to ensure that any future superannuation changes are consistent with an agreed Charter of Superannuation Adequacy and Sustainability.

Sources: Treasurer and Minister for Financial Services and Superannuation, joint media releases Nos 20,21 and 22, 5 April 2013, www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2013/020.htm&pageID=003&min=brs&Year=&DocType=;  www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2013/021.htm&pageID=003&min=brs&Year=&DocType=;  www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2013/022.htm&pageID=003&min=brs&Year=&DocType=;

Treasury exposure draft legislation, “Superannuation concessional contributions caps”, 6 May 2013, www.treasury.gov.au/ConsultationsandReviews/Submissions/2013/Superannuation-concessional-contributions-caps;

Minister for Financial Services and Superannuation media release No 031, 7 May 2013, http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2013/031.htm&pageID=003&min=brs&Year=&DocType=.

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