Government announces tax changes

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The wealthy will be targeted by the super changes announced by Treasurer Wayne Swan.

According to reports in major news, those with about $2 million in superannuation will lose tax concessions under the new changes. This is estimated to affect about 16,000 people in 2014-15.

For people with more than $2 million in super assets supporting income streams, the reform will affect assets earning a rate of return of 5%. It will save about $350 million over the forward estimates period, according to the reports.

A tax exemption on superannuation earnings supporting pensions and annuities will be capped at $100,000, and anything above that level taxed at a rate of 15% during the accumulation phase.

Mr Swan said there was a disproportionate level of government support that flowed to a select few.

"There is something wrong in the system where working Australians on average wages are providing excessive support to people with millions in their superannuation account," he told reporters.

"Why should someone who has millions of dollars in a superannuation account pay no tax on their earnings while someone on $80,000 a year pays a marginal tax rate of 37 cents in the dollar on every additional dollar they earn."

Withdrawals will continue to remain tax-free for those aged 60 and over, and face the existing tax rates for those aged under 60.

The Government will provide an unindexed $35,000 concessional cap to anyone who meets certain age requirements - available to those 60 and older from July 1st 2013, and accessible to people aged 50 and over from July 1st 2014. The general concessional cap is expected to reach $35,000 from July 1st 2018.

Excess concessional contributions will be taxed at the individual's marginal tax rate, plus an interest charge. Clients will be allowed to withdraw any excess concessional contributions made from July 1st 2013 from their super fund.

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  • Pat on 5/04/2013 11:56:16 AM

    Whilst I don't agree with the proposal without seeing the detail, it is astonishing seeing comments on this site by people commenting without any grasp of the situation:

    Long Term Cynic - this has nothing to do with pension payments. "future earnings ... on assets supporting income streams will be tax free up to $100,000 a year. Earnings above $100,000 will be taxed at ...15 per cent that applies to earnings in the accumulation phase."

    Stu - the $100,000 will be indexed at $10,000 increments.

  • Leo on 5/04/2013 11:43:12 AM

    As usual when it comes from Wayne its stupid. people that have more than 2 mil in super will just make a lumpsum withdrawal to bring it below 2 mil

  • SS on 5/04/2013 11:38:32 AM

    What about tax on cap gains within a SMSF pension? When we sell a property now are we going to get taxed on that as well?
    Changes are good for planners though- there will be lots of work re-allocating to assets that do NOT provide income- TLS and the banks beware...

  • Steve on 5/04/2013 11:32:17 AM

    Kerry Sourasis has hit the nail on the head. Investors wear all the losses in poor years, and Swan takes 15% in the recovery years. Sounds like the mining tax to me.

  • Mel on 5/04/2013 11:29:33 AM

    OMG would they leave Super alone? We may as well cancel the whole Super system, because no-one is going to want to use it anyway. "They keep changing the rules, but my money is locked up, why would I use Super as my savings system?" OR better yet, just put our clients money into a bank in Cypress! Same outcomes, without the hypocrisy!

  • Really Wayne? on 5/04/2013 11:29:31 AM

    Here's an idea Wayne - Broad based tax system!

  • Mary Benton on 5/04/2013 11:28:34 AM

    Definitely penalises small business owners, who work hard to build up their business value and create jobs at the same time. Sounds like we're back to the complicated world of RBLs...

  • Chris on 5/04/2013 11:24:29 AM

    Surely this is only the 'Taxable' portion of pensions ???????? Swan the lame duck does it again.

  • Kerry Sourasis on 5/04/2013 11:15:20 AM

    The super wealthy could be someone with $500,000 in super who had a great year in super returns ie 20% plus(to make for up for the 5 years of negative returns. For that alone the $100,000 pa should be averaged over 5 years. Theoretically, it will affect 16,000 people but that's the spin. As always its the ones who have behaved responsibly that are caught.

  • Josh on 5/04/2013 11:03:07 AM

    The genesis of Superannuation was never to be 'fair'. It was designed to entice people to save to become self sustaining in retirement, and not have to rely on Government payments. God forbid that someone, maybe even a 'hard working Australian' that we keep hearing about, goes out of their way to sacrifice current expenditure to provide for their future. I also notice that in the calculation method applicable to the Politician's defined benefit schemes, 'the amount of notional earnings each year will fall as a person grows older, in the same way that yearly earnings for people in defined contribution schemes fall over time as they draw down their capital.' So, they get the benefit of an increasing pension for life, and a reducing tax bill! Are they for real?

  • Greg F on 5/04/2013 11:01:46 AM

    A little comment I heard about deeming account balances of pension accounts?? So does that mean what is now considered a "return of your own capital", as per definition for the past 30 years, will now be classed as income? Old Billy just slipped that in without another word on it. If true, this will affect many more people than just the few thousand wealthy they claim to be targeting.

  • Belinda on 5/04/2013 10:57:31 AM read my mind!

  • Brian Harris on 5/04/2013 10:55:48 AM

    Wayne, if you need millions of dollars to reduce the budget deficit which by the way you promised was not going to happen on your watch; instead of taking money from any Australian's super savings, why not stop the boats coming and save billions of dollars tending to economic queue jumpers. Must be lots of savings possible there. Stop kow-towing to every little United Nations convention when they are not in Australia's best interest.

  • Stu on 5/04/2013 10:48:08 AM

    This a total disgrace. This is nothing more than a socialist agenda of an attack on those that strive to get ahead in life. Two million dollars in super is nothing when you take in account the cost of living and longivity. I have a client that I am doing some financial modelling on this morning who is 30 years old and wants to retire at 65 and have an annual income of $65K in present dollars. He will need to have $3.1M in super assets. Is this going to put my client the the class of the super rich? I don't think so.

    The whole concept of the SGC was encouraging Aussies to save so they weren't a burden on the Govt in retirement. Like most things with this current Govt they are unable to grasp reality, comprehend the concepts and make good decisions.

    I have particular fears for the impact this will have on small business owners who will want to sell their businesses at retirement and roll the proceeds into super. Here lies another issue that will discourage small business and will in the long term cost jobs.

  • Tony on 5/04/2013 10:45:31 AM

    "There is something wrong in the system where working Australians on average wages are providing excessive support to people with millions in their superannuation account" - this is from our Treasurer; what else can I say but go and get an education!

  • fed up on 5/04/2013 10:44:39 AM

    Inept lame duck treasurer announces another communist policy grab for cash from successful business people and employers to plug the deficit – let alone the debt…..while lame duck prime minister has fled the country, and the criticism. Bring on the election and we can return to sensible fiscal management.

  • Richard T on 5/04/2013 10:41:12 AM

    In the real world to fund the indexed parliamentary super pension that Wayne Swanne will receive when he leaves politics, capital in excess of $5 million would be needed. How convenient for him that he will be exempt from this new tax.

  • Fedup on 8/04/2013 11:45:17 AM

    This is a back flip due to a huge amount of political pressure, from all fronts. If you think that this was the originally intended legislation, you are kidding your self. This is their response to claims they were going to raid the super funds. Can you tell me they would go through all this for the tiny grab they will get. Believe me they wanted to grab a lot more than this!!! Just think your selves lucky this is what they backed down to.

  • Pat on 8/04/2013 8:44:30 AM

    Greg F - fine, explain to me what long term cynic is saying. This is what he said:

    "Presumably that is $100k p.a. of "Taxable" pension payments..." Apart from the fact that the reform is affecting earnings on assets funding pensions and annuities, there is little to no correlation between this and "taxable pension payments". "...otherwise the gov't is engaging in Double Taxation." Either all earnings tax within super is double taxation or this is not.

    "What a nightmare to administer." If this is to be applied at the taxpayer level, agreed, this will be a nightmare to administer, Neil, and I never indicated otherwise.

    Greg F - I probably have a deeper understanding of the super system than you are likely to have, mate.

  • Neil on 5/04/2013 4:36:41 PM

    @Matthew: Get a grip son. If they didnt spend $5.2 billion on pink bats and $2.5 billion (per year mind you) on illegal arrivals, we could have larger concessionas for everybody. Please bring on the election.

  • Neil on 5/04/2013 4:34:18 PM

    My God, I think I might leave the country until the 14th of September.
    Pat get a grip. The proposals would be a nightmare to administer. Any changes to super erodes the public confidence in the system. That can only be a bad thing. God I hate this Govt.

  • Greg F on 5/04/2013 2:40:59 PM

    Hey Pat
    You don't even understand what long term cynic is saying, which means you are not that involved with the industry. And I'm no lib party staffer as Saint Mathew would infer either.

  • Matthew Lock on 5/04/2013 12:59:47 PM

    What a disgrace...every one of the comments above that seek to defend the status quo for the wealthy when our tax dollars should be focussed on assisting those who need assistance should be dismissed as pure political rhetoric...surely no one is saying that a $2mil balance and a $100k pa tax free pension is for those on struggle street...and for those liberal party staffers invading these pages I hardly think that the $350mil in savings over forward estimates is designed to fix the government’s fiscal challenges...are you kidding me...these political rants should be relegated to the right wing blogs that are poising policy debate in this country.

  • Stephen on 5/04/2013 12:53:02 PM

    So the people with $2 million plus in their super are probably people on high incomes and they "may" have paid the top rate of tax accumulating their wealth. I would speculate that anyone with $2 million in their super probably did some or a lot of that non-concessionally because who gets that much under the SGC? Salary sacrificing hasn't been offering huges super contributions for a number of years. So most of the $2 million could be after tax. So now they want to tax on something that may have been taxed at the top marginal rate to start with. What about Mr Average with $500k who has a really good year and makes a 25% return on his super. He is not rich. I can just see the new schemes being invented overnight. That will mean more tax staff to look at these new schemes and that will probably cause a salary spike at the ATO. You have to love the rational of it all.

  • Pat on 5/04/2013 12:47:48 PM

    And no-one is mentioning the proposal to alter the excess concessional contributions tax system? Or is everyone just having a tanty about a headline grabber?

  • Pat on 5/04/2013 12:45:31 PM

    @Leo - why would they take money out of super and place it somewhere else where the likely tax rate will be higher than 15%?

  • Rod on 5/04/2013 10:28:23 AM

    What a disgrace, Wayne Swann will get a CPI linked pension of $175K PA for the rest of his life, where as people in the real world that have worked damn hard , risked their capital paid their taxes are now going to be penalised by this moronic socilistic government , why don't they focus on getting a couple of Million lazy Australians of the welfare system and reduce the $1.2 Billion we pay outa Week in social security benefits !!

  • B Real on 5/04/2013 10:27:32 AM

    Wayne swan does not get it does he. The people that pay the most tax are the wealthy, and they support those less wealthy than themselves with this tax revenue.

  • Andrew on 5/04/2013 12:09:10 PM

    I have to agree that WS just doesn't get it. The intergenrational report still says that the gov will not be able to support C'link pensions by 2041. Governments have made super compulsory and tried to encourage people to save to alleviate that. People who have $2m in super have done under the rules allowable. Now Wayne Duck and his cronies want to grab back off it. Sorry but if you are prepared to put it away and not spend it then where is the reward for doing what the Gov want????

  • Long Term Cynic on 5/04/2013 10:38:15 AM

    Presumably that is $100k p.a. of "Taxable" pension payments, otherwise the gov't is engaging in Double Taxation. What a nightmare to administer. Not that this gov't cares about that.

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