Superannuation Tax Reforms - Released 5th April 2013.
The government have announced a restriction on the tax concessions available to super funds in pension phase. From 1 July 2014, future earnings (such as dividends and interest) on assets supporting pensions will be tax free up to $100,000 a year for each individual. Earnings above $100,000 will be taxed at the same concessional rate of 15% that applies to earnings in the accumulation phase.
This $100,000 threshold will be indexed annually with CPI and will increase in $10,000 increments.
The government has indicated that this reform is expected to affect only around 16,000 Australians who have balances around or above $2,000,000.
Special provisions will apply to capital gains incurred on assets purchased prior to 1 July 2014:
For assets purchased prior to 5 April 2013, the reform will only apply to capital gains that accrue after 1 July 2024;
For assets purchased between 5 April 2013 and 30 June 2014, individuals will have the choice of applying the reform to the entire capital gain, or only that part that accrues after 1 July 2014; and
For assets purchased from 1 July 2014, the reform will apply to the entire capital gain.
Persons therefore have approximately ten years to determine how they will restructure their superannuation assets to account for the new reforms.
These new reforms will not affect the taxation of superannuation withdrawals, these continue to be tax free after age 60.
In addition, the government have advised that this new reform will apply to defined benefit funds. As a defined benefit funds often do not actually earn income (but are paid from government revenue for example) this will be achieved by calculating the notional earnings each year for defined benefit members who receive a concessionally-taxed pension. The calculation will be based a calculation completed by an actuary. Where a person’s notional yearly earnings as calculated by an actuary exceed the $100,000 threshold, the amount in excess of $100,000 will be subject to tax at a rate of 15 per cent.
The media release regarding these reforms can be found here.
Contact A Grade Tax Accountants Penrith on (02) 4731-1405 for all your accounting, bookkeeping, superannuation, tax returns and tax advice needs.
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