The Treasurer revealed in tonight’s budget that the Government will target the private superannuation contributions of Australia’s richest people to the tune of $1 billion to help meet the Government’s surplus promise.
The tax on super contributions for high-income earners with pre-tax incomes of $300,000 or more will be doubled from 15% to 30% in a move estimated to bring in an additional $1 billion.
The Government says this will affect around 128,000 people in 2012-13 or 1.2% of people contributing to superannuation.
The reform only affects contributions and the 15% tax on earnings within superannuation will remain.
In a bid to save more money, the Government also announced a later start date for the higher concessional contributions cap measure, which will be deferred for two years from July 1, 2012 to July 1, 2014.
Under the higher concessional contributions cap measure, individuals aged 50 and over with superannuation balances below $500,000 will be able to make up to $25,000 more in concessional contributions – double the rate of everyone else.
The Government claimed delaying the scheme would allow smoother implementation, but it will also allow it to save a total of $2.093 billion on the forward estimates.
This includes $2.5 million in 2012-2013, $91.9 million in 2013-14, $600 million in 2014-15 and $1.4 billion in 2015-2016.
The possibility of such a delay was leaked prior to budget night and the Australian Institute of Superannuation Trustees told Smart Company any such changes would be a misstep by the Government.
“We would be disappointed if reports are true that the higher $50,000 concessional cap limit for those over 50 with less than $500,000 in super is shelved because it is deemed too difficult to administer,” says Fiona Reynolds, chief executive of the AIST.
“If the Australian Tax Office is able to deal with the administration of the new rules affecting those with earnings above $300,000, we see no reason why it can’t also deal with this policy.”
The only boost to superannuation is through the introduction of the Low Income Superannuation Contribution.
From July 1, workers with an income of up to $37,000 will receive a boost of up to $500 to their superannuation savings, to ensure they effectively pay no tax on their superannuation guarantee contributions.
In his budget speech tonight, Wayne Swan said the superannuation reforms were aimed at “improving the fairness of concessions for contributing to superannuation”.
Swan said the super reforms were funded by the mining tax and would “help more Australians secure a better retirement and give those on low incomes a better deal.”