Another super penalty for people in catch-up mode
Private Matters, July 2012
Concessional contributions limited to $25,000 for the next two financial years.
Russell Mason, National Superannuation leader at Deloitte, is suffering post-budget disappointment.
“The surprise in the Budget announcement was that the increase in the concessional cap for the over 50 age group with superannuation balances of less than $500,000 has been deferred for two years. The industry expected this reform to be introduced before that date,” he says.
Under a measure announced in the 2010 budget, workers aged over 50 with less than $500,000 in superannuation would have been able to put an additional $25,000 into their retirement fund with concessional tax treatment.
That measure has now been delayed until July 1, 2014. The Treasury Department said the deferral of the implementation of the higher cap would deliver "significant synergies and efficiencies'' by coming into effect at the same time as changes to super fund reporting due in 2014.
Treasury said the deferral of the start date for the higher concessional contributions cap will save $1.46 billion over four years.
“This is a disappointing delay and another impediment for those who are planning to maximise their savings for retirement,” Mason says. “We estimate that could mean up to $8 billion less in the system – it’s an enormous penalty as far as we are concerned.
“Those that are affected are the people in catch-up: the people who had mortgages, school fees and other expenses. So when they were 30-years-old, they couldn’t afford to put the money in and now that they’re hopefully more affluent they can afford it (to put more money in).
“They are now restricted on how much they can put in – at least on a concessional level.
Everybody, irrespective of age, will be limited to $25,000 for the next two financial years.
“Then, from July 1, 2014 the rules will change again. If you are 50 and older and have a total balance of less than $500,000, you will be able to put in up to $50,000 in concessional contributions,” he confirms.
The other superannuation changes in the recent budget were not-so-disappointing to Russell Mason: the increase in the Superannuation Guarantee (SG) to 12%; an increase in the age limits for SG contribution; the increase in the tax on concessional contributions for high income earners; and the Low Income Superannuation Contribution which will effectively rebate the contributions tax up to an amount of $500 for those earning less than $37,000 per annum.
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