Several changes to superannuation have been announced since 5 April 2013, and these need some consideration in planning in the near future.

SGC Levy

Increases to 9.25% from 1 July 2013.

Abbott has promised to delay this for 2 years, but until there is legislation (if the Coalition wins), the 9.25% is payable.

Concessional Contributions and Caps

The maximum deductible amount this financial year is $25,000.  From 1 July 2013, for those over 60, the tax deductible amount is $35,000.  From 1 July 2013, those over 50 also increase to $35,000.  All others remain subject to a cap of $25,000.

From 1 July 2013, individuals who exceed the tax deductible cap can withdraw the excess, but this amount plus interest will be added to the taxpayer's income and subject to tax at the taxpayer's marginal tax rate.

Four years ago for those over 50 the cap was $100,000.  So these changes rectify only a part of what Labor stripped away.

Non-Concessional Contributions

The maximum non-deductible contribution is still $150,000, or $450,000 if under 65 when made.  The rules for excess contributions are complicated and it is necessary to look back at least two years to ensure there is no excess.  The tax rate on the excess can be 72%, so it pays to check before the contribution is made to the Fund.

This is an inequitable penalty, and the Government seems only interested in the tax to be raised and not in allowing genuine mistakes to be corrected.

Centrelink Pensions

From 31 December 2014, individuals able to access Centrelink benefits need to review the opportunities to lock in the benefits, and starting an Account Based Pension before 1 January 2015 ensures the Centrelink Income Test will not apply.  From 1 July 2015, new pensions from a superannuation fund will cease receiving partial or full exemptions under the Centrelink Income Test.

This may mean taking certain classes of benefits from the super fund, re-contributing to the fund (which changes the class of benefit), and commencing an ABP.  There may be a better Age Pension and Health Care Card.  This must be done before 31/12/14.

Taxing Pensions

From 1 July 2014, the tax exemption for earnings on superannuation assets supporting income streams will be capped at $100,000 per person, and earnings above this will be taxed at 15%.

Where a capital gain is made by the fund, the whole gain without any discount applied, is included in the income cap.  There are some timing rules based on when the assets were first purchased by the fund.

It is hard to see that this is not only about the potential taxes to be raised.  It involves more complicated accounting and tax returns and will likely cost the ATO quite a lot to administer.

What Needs to be Done

 - Those in pension mode need to review expected earnings for 1 July 2013 to 30 June 2014, in particular potential capital gains.

- Before 30 June 2013, ensure concessional contributions are less than $25,000.and non-concessional less than $150,000 (but check the contributions made in the previous two years).

- If Centrelink benefits are likely to be accessed, review the opportunities to lock in benefits before 31 December 2014.

Important:   This is not advice to stop, start or change a superannuation pension.  Take advice on both the financial and tax aspects.  We can refer you to competent financial planners if you would like advice on the options.