Partner, Alan Jessup and Associate, Kimberley Levi explain the changes in the recently released ATO indexed rates and thresholds.
The Australian Taxation Office has released the rates and thresholds that apply to contributions and benefits, employment termination payments, super guarantee and contributions for the 2015/2016 financial year.
It is important to be aware of the changes to:
- the maximum contribution base amount for superannuation contributions
- the cap for employee termination payments
- the tax free limit for genuine redundancy payments.
If an employee is eligible for compulsory superannuation guarantee contributions, an employer must pay a minimum percentage of the employee’s ordinary time earnings into a complying super fund. The minimum percentage required to be paid by an employer remains unchanged, being 9.50%. Whilst the percentage was due to increase, there is a freeze to increasing the percentage until 1 July 2021.
An employer does not have to provide superannuation contributions for an employee for that part of an employee’s ordinary time earnings above the maximum contribution base amount. Importantly, from 1 July 2015, the maximum contribution base amount will increase from $49,430 to $50,810 per quarter. There are caps on the amount that can be contributed to a superannuation fund each financial year that is taxed at lower rates. The superannuation concessional and non-concessional contributions caps remain unchanged. The concessional contributions cap is $30,000 (or $35,000 for those aged 49 years or over on 30 June 2015) and the non-concessional cap is $180,000. Some contributions do not count towards a contribution cap amount. In this regard, it is important to note that from 1 July 2015, there are changes to the CGT cap amount, low rate cap amount and untaxed plan cap amount.
Employee termination payments (ETPs)
Lump sum payments paid to an individual when their employment is terminated or after the death of an employee, that qualify as ETPs are subject to concessional tax rates. Depending on the type of ETP, the concessional tax rate is limited to the ETP cap or the smaller of the ETP cap and the whole-of-income cap. From 1 July 2015, the ETP cap will increase from $185,000 to $195,000. The whole- of-income cap remains unchanged at $180,000 as this cap is not indexed.
Genuine redundancy payments
Payments that qualify as genuine redundancy payments are tax free up to a limit, based on the employees’ years of service with the employer. From 1 July 2015, the tax free limit for genuine redundancy payments will increase from $9,514 plus $4,758 for each completed year of service to $9,780 plus $4,891 for each completed year of service.