Government’s Superannuation changes need to be simplified and easily administered, says DeloitteDOWNLOAD
5 April 2013: The Government’s changes to superannuation announced today are a wholesale change to the Superannuation industry according to Russell Mason, National Superannuation leader at Deloitte.
The Government’s announcement has highlighted that from 1 July 2014, post-retirement superannuation earnings over $100,000 per annum will be taxed at 15%. This will apply to all superannuation pensions, including defined benefit pensions.
Currently all post-retirement super earnings are tax free and the Government estimates this will save $350 million over the forward estimates period and $10 billion, when combined with the higher contribution tax for those earning over $300,000 p.a., over the next decade.
“We don’t have enough detail as to how this new tax will be collected and I am concerned this will add considerable administration and reporting expenses to all superannuation funds. These costs will be borne by all members not just those with high balances,” said Mr Mason.
“If the super tax system is to be reformed it needs to be done in a simplified manner that is easily understood by fund members and is easily administered. We don’t want people to lose confidence in the system and consider other saving vehicles outside of superannuation if it does not promote the concept of saving for the future.”
On the other hand, Deloitte applauds the Government’s decision to increase the concessional contribution cap from $25,000 to $35,000 for those sixty and over (from 1 July 2013) and for those fifty and over (from 1 July 2014) with no limit on the individual’s super balance.
“This will encourage additional savings, especially from middle-income earners who see retirement on the horizon and are in ‘catch up’ mode,” added Mr Mason.
Other key components of the Government’s superannuation reforms include:
Changes to the excess contributions tax regime for concessional contributions made from 1 July 2013
Special arrangements will apply for capital gains on assets purchased before 1 July 2014:
“These transitional arrangements will ensure that people who have already purchased superannuation assets will have ten years to decide whether they want to restructure their superannuation holdings, before their capital gains start to be affected,” said Mr Mason.
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