Last night Treasurer Joe Hockey handed down his first Budget. With the focus on reducing the budget deficit there were very few changes proposed to the superannuation system. However the following announcements were made.
The SG rate is currently scheduled to increase in annual 0.5% increments until it reaches 12% on 1 July 2019. The Government has now announced that the SG rate will rise to 9.5% on 1 July 2014, but will then remain at this rate for four years. The next increase will be to 10% on 1 July 2018, with annual increases of 0.5% until 1 July 2022, when it will reach 12%.
If you are a Queensland Government employee making standard member contributions of 2%-5%, this announcement has no impact on your current employer contribution arrangement.
Under current contribution cap arrangements, any contributions made in excess of the non-concessional contribution cap are taxed at the top marginal rate. As these contributions are made from income that has already been taxed, this means that you could effectively be paying tax of up to 93% on these contributions.
The Government has now proposed that any excess contributions made from 1 July 2013, and any associated earnings, can be withdrawn from a member’s super account. The associated earnings will then be taxed at the member’s marginal tax rate.
The Government has reaffirmed its intention to cancel the LISC, which is a refund of the 15% contributions tax paid by Australians who earn less than $37,000 a year.
In an announcement anticipated by many, the Government has proposed the Age Pension qualifying age will gradually increase from 1 July 2025. The qualifying age will rise by six months every two years until it reaches 70 on 1 July 2035. The table below shows future Age Pension eligibility by date of birth.
No changes were announced to preservation ages, which is the age you can access your superannuation.
From 1 January 2015, any tax-free income you receive from your QSuper Income account will be assessed as income when determining eligibility for the Commonwealth Seniors Health Card (CSHC). If you are deemed eligible for a CSHC before this date, this change does not affect you.
The Government reaffirmed its commitment to its paid parental leave scheme, and that this scheme would include superannuation payments to help address the disparity between the average retirement incomes of men and women.
Note that these budget changes are yet to be legislated and may be subject to change. We will keep you up to date on all proposed changes on our website and in our member newsletter Super Scoop.