On Friday 5 April 2013 the Government announced reforms to the superannuation system. Key reforms announced include:
- Cap on the tax exemption for earnings on assets supporting a super income stream – from 1 July 2014 earnings in super on assets supporting income streams will only be tax free up to $100,000 a year for each individual. Earnings above $100,000 will be taxed at 15%, consistent with earnings on funds in accumulation phase. Transitional arrangements will apply for capital gains on assets currently held and those purchased before 1 July 2014.
- Changes to concessional contributions cap – an unindexed $35,000 concessional cap will apply from 1 July 2013 for people aged 60 and over, and from 1 July 2014 for individuals aged 50 and over. The new higher concessional cap will not be limited to individuals with superannuation balances below $500,000.
- Changes to the operation of excess contributions tax (ECT)– from 1 July 2013 excess concessional contributions will be taxed at the individual’s marginal tax rate rather than top marginal tax rate. The individual will have the choice of paying the ECT personally, through their super fund, or fully release the after ¬tax excess concessional contribution from superannuation.
- Reforms to arrangements for lost super – the account balance threshold below which inactive accounts, and accounts of uncontactable members, are required to be transferred to the ATO will be further increased to $2,500 from 31 December 2015, and to $3,000 from 31 December 2016.
- Extending tax treatment to deferred lifetime annuities (DLAs) – from 1 July 2014 DLAs will be provided with the same concessional tax treatment that superannuation assets supporting income streams receive.
- Establishment of a Council of Superannuation Custodians – the Council will be formed and charged with assessing future superannuation policy against an agreed Charter of Superannuation Adequacy and Sustainability.