A lot happened in the Federal Parliament before 30 June with many super, tax and related legislation being dealt with. Some laws didn’t make it through Parliament before the end of June and may therefore lapse.
“Successes”
Firstly, let’s start with the three changes about super contributions that have been successfully legislated.
- Revised taxation of excess contributions – from July 2013 excess concessional contributions will be taxed at a taxpayer’s marginal rate instead of the highest marginal rate. You’ll be allowed to withdraw any excess concessional contributions from the super system. The removed contributions will be taxed at your marginal rate plus an interest penalty for the late payment of tax.
- The concessional contribution cap increases – investors aged 59 or over on 30 June 2013 will now have a cap of $35,000 for the 2013/14 financial year. Everyone else will continue to have a $25,000 cap for that year. The $35,000 cap will apply for those aged 49 or over on 30 June 2013 for the 2014/15 year. If current policies are unchanged, then everyone else will have a cap of $30,000 in that year.
- Increase in contributions tax for higher income earners – for investors who earn taxable income, employer reportable fringe benefits and total investment losses (there are some specific exclusions from this income definition) of more than $300,000, all concessional contributions, other than excess concessional contributions, after June 2012 will face 30% tax on those contributions.
Still in the wings
Here’s a quick summary of where some policy announcements are at:
- Penalties for SMSFs breaching super laws –the Cooper Review said the Tax Office should be allowed to impose penalties directly against SMSF trustees for super breaches. In addition, the Cooper Review also said SMSF trustees who breached the super laws should be forced by the Tax Office to receive formal education on their super law obligations. The fines and costs of remedial education would have to be paid out of the trustee’s own money not the super funds bank account. The Government accepted all these proposals but the amending legislation didn’t make it through Parliament before the end of June. If Parliament doesn’t sit between now and the next election, this legislation will lapse and would only become law if it were reintroduced into the next Parliament. It was going to start on 1 July 2013. If it gets reintroduced, will it have the same commencement date?
- SMSFs acquiring assets from members – thankfully this change has been dumped just before the amending legislation was to be debated in the House of Representatives. This policy would have restricted how SMSFs acquire assets from a fund’s members, their relatives and related trusts and companies – for example, off market transfers of listed shares and business real property. This policy change had been recommended by the Cooper Review because it said the current law was open to abuse but provided no proof that any misuse was widespread.
- Taxing pension income – in April, the Government said it wanted to tax pension income greater than $100,000 per year. Legislation to implement this change hasn’t been introduced into Parliament. In fact, a draft of these new rules hasn’t been publicly released. We’ll probably have to wait until after the next election to see the finer detail on how these rules will work.
- Use of the term financial planner and financial adviser – the financial services industry has lobbied for decades to only allow certain people to describe themselves as financial planners and advisers. The Gillard Government caved into this pleading and introduced Parliamentary amendments. However, this change didn’t make it through Parliament and so it lapses if Parliament doesn’t sit again before the next election. It would be fair to say that the Coalition isn’t keen on this policy. The new ALP leaders haven’t said what they think of it.
- Financial planners needing to be registered with the Tax Agents Board – this is a very controversial measure in the financial services industry but didn’t get through Parliament by the end of June. It’ll only move forward if reintroduced.
- Tax penalties for taking money out of super illegally – this policy was to commence on 1 July 2013. It would have seen any super monies taken out of super before retirement being taxed at the highest marginal rate, if the withdrawal didn’t occur because of a super fund member’s death, permanent or temporary disablement or terminal illness. This policy also didn’t get through before Parliament finished its work at the end of June.
- Employer reporting of super contributions on employee payslips – this policy was to commence on 30 June 2014, but it failed to make it through Parliament before the end of June.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
Also in the Switzer Super Report:
- James Dunn: Macquarie – how the mighty have fallen [1]
- Peter Switzer: Waiting on China [2]
- Paul Rickard: No sizzle in Westpac offer [3]
- Rudi Filapek-Vandyck: Computershare and Lend Lease upgraded [4]
- Jordan Eliseo: Gold – the case for a bull market [5]
- Penny Pryor: Sydney reaches an 80% clearance rate [6]