Prior to the release of the Federal Budget this month, Bill Shorten (Minister for Financial Services and Superannuation) announced a number of changes to the superannuation law. In the 2013 Federal Budget, the Government has now confirmed many of those changes, which purportedly aim to create “a more equitable and sustainable retirement income system.”

Some of the key changes to the superannuation system are:

  1. From 1 July 2013 to 1 July 2019, the Superannuation Guarantee will be incrementally increased from 9% to 12%. From 1 July 2013, the rate will increase to 9.25%. In the Budget reply speech, the Coalition confirmed that they would not roll-back this increase should they be elected. However, they will freeze any further increases until July 2016;
  2. From 1 July 2012, the Government announced that individuals with income above $300,000 will have the tax rate imposed on their superannuation contributions increased from 15% to 30%. The legislation enacting this change was introduced into Parliament this month and is expected to pass without amendment;
  3. From 1 July 2014, earnings on assets supporting a pension will now be tax free up to $100,000 and be taxed at 15% for earnings above $100,000. This changes the current treatment where all earnings on assets supporting a pension are tax free in the fund. There will be special rules which apply to grandfather the previous tax treatment in respect of capital gains derived on assets acquired prior to 5 April 2013;
  4. From 1 July 2013 taxpayers aged over 60 will have their concessional contribution cap increased to $35,000;
  5. From 1 July 2014 taxpayers aged 50 and over will have their concessional contribution cap increased to $35,000;
  6. The Excess Contributions Tax will be reformed. With effect from 1 July 2013, if a taxpayer makes contributions to a superannuation fund which exceed the concessional contribution caps, the taxpayer will have the option of withdrawing the amount of the excess contribution and having it taxed at the taxpayers marginal rate (rather than at the 46.5% rate currently imposed);
  7. The Government will, from 1 July 2014, provide the same concessional tax treatment to deferred life annuities that superannuation assets supporting superannuation income streams currently receive;
  8. The Government will increase the account balance threshold for lost superannuation held by the ATO from $2,500 to $3,000 from 31 December 2016; and
  9. In order to keep the aged pension “sustainable and fair” (that is, to decrease the amount of pension the Government needs to pay), from 1 January 2015 the Government will extend the normal deeming rules to superannuation account-based income streams for the purposes of the pension income test. All products held prior 1 January 2015 will be grandfathered indefinitely and will not be subject to the extended deeming rules.