On Friday the 5th of April, the Government announced a range of proposed superannuation reforms, particularly around pension account earnings and contribution limits. Please note that these proposals are not yet legislated, and as always the team at AGS Financial Group are well placed to advise you on your strategic options as the proposals progress.

On Friday the 5th of April, the Government announced a range of proposed superannuation reforms, particularly around pension account earnings and contribution limits. Please note that these proposals are not yet legislated, and as always the team at AGS Financial Group are well placed to advise you on your strategic options as the proposals progress.

Key elements of the reforms include:

• Tax free withdrawals from age 60 remain unchanged.
• From 1 July 2014 the tax exemption applying to pension account earnings (i.e. earnings within the fund) will be limited to $100,000 per individual with 15% tax applying on any excess. This cap will be indexed by the CPI in $10,000 increments. Similar arrangements will impact defined benefit funds.
• The $25,000 concessional contribution cap remains but it increases to $35,000 (unindexed) for individuals aged 60 and over from 1 July 2013 and aged 50 and over from 1 July 2014. From 2018 this cap will apply to all individuals.
• Excess concessional contributions from 1 July 2013 can be withdrawn from the fund and taxed at marginal rates plus an interest component rather than retained in the fund and taxed at the highest marginal rate. 
• From 1 January 2015 all new account based super pensions will be assessed as income for Centrelink income test purposes rather than benefit from a reduction based on the capital component. All existing pensions at that date will be grandfathered. 
• An extension to the transfer of small lost accounts to the ATO as unclaimed monies will be implemented. The threshold will be increased from $2,000 to $2,500 from 31 December 2015, and then from $2,500 to $3,000 from 31 December 2016. 
• Still pending is the previously announced higher tax on contributions for those earning over $300,000. Together these measures are expected to net the government another $10 billion over the next decade.

Naturally, should these measures become law, a number of strategic responses and considerations would emerge for clients, such as balance sharing, timing of capital gains realisations, and early commencement of income streams for Centrelink candidates.

As always, please contact us should you require any advice or assistance with your plans.

With thanks to Cavendish and the Financial Planning Association.

Published : 07 Apr 2013