Lots of announcements on super today, as I am sure you will all be aware. All of which will be tabled IF the current government is re-elected. A way to go then!
So first the good bits;
- No changes to transition to retirement pensions for the over 55’s
- No change to the taxation of pension income drawn ie still tax free if over age 60
- No changes to the taxation of lump sums ie still tax free if over age 60
- No maximum balance caps
The main change is the taxation of income within pension (not accumulation) accounts from 1 July 2014. Not what you draw as a pension, but what the fund itself earns.
Currently these earnings are taxed at 0% and (depending on how nice your superfund is) the franking credits earned should be refunded to your account. Some funds keep the franking credits for themselves to reduce the headline admin fees – but that is a whole other story.
It is proposed that where the income (which has not been defined) earned by the pension assets is more than $100,000 it will be taxed at 15%. ie the same rate it would be taxed if it were still in the accumulation phase. This is only expected to affect 16,000 individuals.
However some issues that those in power may not have thought of spring to mind including …
- How will this be administered where individuals have more than one pension? Can’t be done by the funds, so would you have to include the earnings of your pension accounts on your individual tax return in order to collate the information?
- If the information is collated via the personal returns, how do you pay this extra tax? From one pension, prorated across all your pensions, or personally?
- Smaller funds with lumpy assets (eg property) may go over the $100k threshold in the year a property is sold.
- Pension trustees will have to revalue assets at 1 July 2014 in order to be able to calculate capital gains from there on.
The other major proposal is a change to the concessional cap yet again. Some would say this is to trick the unwary into breaching the caps and having to pay excess contributions penalty tax.
However, the plan is from 1 July 2013 those over age 60 can contribute $35,000, and from 1 July 2014 those over 50 can contribute over $35,000. Everyone else gets to keep the woefully inadequate $25,000 cap. A huge potential for people to get that one wrong!
When I hear further I’ll let you know