There are a number of changes to superannuation in place from 1 July 2013. We have covered the major changes that have occurred for your reference.
Superannuation Contribution Limits & Salary Sacrifice Arrangements
From 1 July 2013, the concessional contributions cap for individuals aged 59 or over on 30 June 2013 has officially increased to $35,000.
The concessional contributions cap for individuals aged under 59 at 30 June 2013 remains at $25,000 for the tax year ending 30 June 2014.
If you have a salary sacrifice arrangement in place, we recommend you review your arrangement with your employer to ensure the concessional contributions cap are maximized where possible and to ensure that the salary sacrifice arrangement does not exceed the concessional contributions cap for 2014.
Non-concessional contributions cap remains at $150,000 per annum (subject to the “bring forward” rule for individuals under 65 years of age).
For those who will be aged 59 or over on 30 June 2013, we strongly suggest that you review your financial affairs for the possibility of taking advantage of the increased concessional contributions cap for the 2014 financial year.
Withdraw Of Excess Concessional Contributions
For concessional contributions made from 1 July 2013, legislation has been passed to allow for excess concessional contributions to be withdrawn without penalty.
Under the new arrangement, excess concessional contributions, if withdrawn, will be taxed at your marginal tax rate plus Medicare Levy and a general interest charge rather than the highest marginal tax rate plus Medicare Levy.
It is important to note that the ability to withdraw excess contributions only applies to concessional contributions. Excess non-concessional contributions are still subject to the highest marginal tax rate plus Medicare Levy.
If you have an excess concessional contribution, then the withdrawal of the excess is recommended where:
- your taxable income in the year the excess contribution was made is less than $180,000; or
- you have already contributed the maximum non-concessional contributions (including the use of the “bring forward” rule)
Increase In Superannuation Guarantee Contributions
The superannuation guarantee contributions rate is increased from 9% to 9.25% for the 2013-14 financial year. There will be further increases in each of the years leading up to the 2019-20 financial year which by then the rate will be 12%.
Superannuation Guarantee Age Limit Abolished
The upper age limit at which superannuation guarantee payments need to be provided for an employees is removed on 1 July 2013. Employers are now required to make superannuation guarantee payments for employees aged 70 or over.
It is worth noting that an employer is now entitled to a tax deduction for superannuation guarantee payments made on behalf of employees aged 75 or over who are not covered by an industrial award.
Higher Minimum Pension Payments
The minimum pension relief ceased on 30 June 2013. For the 2013-14 financial year, self-funded retirees with an account based pension are required to take the standard minimum pension for the year. The minimum pensions are based on the following table:
To ensure the minimum pensions can be paid, we strongly suggest SMSF trustees to review the cash flow and the liquidity of investments of their SMSF.
Increased SMSF Supervisory Levy
The SMSF supervisory levy has increased to $259 for the 2013-14 financial year and onwards.
The collection of the levy will also be brought forward so that it is collected in the same year of income. The change in timing and payment of the levy will be phased in over two financial years.
SMSFs are required to pay $321 (being the supervisory levy for 2012-13 and half of the supervisory levy for 2013-14) when they lodge the 2013 SMSF annual return. An adjustment can be made if the SMSF is wound up in the 2012-13 financial year.
Changes To Off-Market Transfers Abandoned
The Government previously proposed that, from 1 July 2013, asset transfers between SMSFs and related parties should take place through an underlying market. If an underlying market does not exist, the transfer must be completed with a valuation by an independent qualified valuer.
The proposed changes were removed from the draft legislation as it passed through the parliament and hence the current off-market transfer arrangement remains in place.