Budget matters for your super

In delivering the 2012-2013 Federal Budget, Treasurer Wayne Swan declared Australia to be one of the world's strongest economies, and said that the deficit years of the global recession are behind us.

While this is welcome news, it’s also important to look at how this budget may affect your super savings and retirement goals. Knowing what’s been proposed gives you the chance to plan ahead of time and to maximise what’s available till the end of the current financial year.  

Delayed date for concessional cap

The start date of the higher concessional contributions cap for over 50s will be postponed from 1 July 2012 to 1 July 2014. The previous proposal was to allow individuals aged 50 and over with a superannuation balance below $500,000, to make up to $25,000 more in concessional contributions than the standard $25,000 concessional contributions cap.

Concessional contributions are sometimes referred to as ‘pre-tax contributions’ such as contributions made on behalf of an employee by their employer and contributions made through salary sacrifice. Details of other contributions regarded as concessional contributions, for self-employed persons for example, can be accessed on the ATO website^[1].

The deferred date now means all individuals, regardless of age and account balance will be subject to the standard $25,000 concessional cap for the next two financial years.

It’s expected that from 1 July 2014, the standard $25,000 concessional cap will likely have increased to $30,000 through indexation. Accordingly, the higher concessional contributions cap will then likely begin at $55,000.

Higher tax for higher incomes

A higher tax on concessional superannuation contributions has been proposed for very high income earners. These individuals with incomes higher than $300,000 will have a superannuation contributions tax of 30 per cent applied to their concessional contributions from 1 July 2012.

Income for this purpose will include all concessional contributions made for or by the individual. If someone is earning less than $300,000 excluding their concessional contributions, but the inclusion of their concessional contribution pushes their income over $300,000, then the higher tax will only apply to that part of the concessional contribution, which pushes their income above the $300,000 income threshold.  

More super for you

There are several proposals aimed at helping you to increase your super balance, which is always good news.

From 1 July 2013, the Superannuation Guarantee Contribution (SGC) made by your employer will gradually increase from nine to 12 per cent by 2019. Plus the maximum age limit for receiving SGC, which is currently at 70, will be abolished. You can use these proposals to work out what impact more super can have on your retirement goals.

What’s more, a government low income superannuation contribution payment of up to $500pa will be available for low income earners, earning less than $37,000pa who make or who have an employer make concessional contributions on their behalf, on or after 1 July 2012.

What next?

Of course, these proposals will only come into effect once legislated in parliament.

But in the meantime, if you have any questions or are keen to understand how these proposals may affect your personal circumstances and how you may make the most of them, we’re here to help. So, please call us on (08) 9315 4788 or admin@explorewealth.com.au.

[1] Super contributions – too much super can mean extra tax – concessional contributions. (2011). ato.gov.au/super/content.aspx?menuid=0&doc=/content/00106372.htm&page=3&H3

What you need to know

This article contains general information only. It does not take into account your objectives, financial situation or needs. Please consider the appropriateness of the information in light of your personal circumstances. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning and other companies within the AMP Group will receive fees and other benefits, which will be a percentage of the premium you pay and/or the advice fee you agree with us. Some of the information in this article is based on our interpretation of the law. It is a summary of the subject matter covered and is not intended to be comprehensive tax or financial advice. No reader should act on the basis of this article without obtaining specific professional advice. Further details are available from us, or AMP Financial Planning Pty Limited on telephone 1300 157 173.