Government outlines super reform
The Federal Government has confirmed it will cap tax exemption status for super contributions to the first $100,000 of personal income.
In a statement, Treasurer Wayne Swan said that the need to limit the tax exemption status comes as a result of an ageing population and a need to make the system more ‘fair and sustainable’.
Under the current arrangement, all earns on assets supporting superannuation and annuities are tax free, while all earnings in the accumulation phase of superannuation are taxed at 15 per cent.
From July next year, all future earnings on supporting income streams will be tax free up to $100,000 a year, while earnings above $100,000 will be taxed at 15 per cent.
The $100,000 threshold will be indexed to the Consumer Price Index (CPI), and will increase in $10,000 increments. Assuming a conservative estimated rate of return of 5 per cent, earnings of $100,000 would be derived from individuals with around $2 million in superannuation.
Special arrangements will apply for capital gains on assets purchased before 1 July 2014:
- For assets that were purchased before 5 April 2013, the reform will only apply to capital gains that accrue after 1 July 2024;
- For assets that are purchased from 5 April 2013 to 30 June 2014, individuals will have the choice of applying the reform to the entire capital gain, or only that part that accrues after 1 July 2014; and
- For assets that are purchased from 1 July 2014, the reform will apply to the entire capital gain.