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The Government will provide eligible individuals who breach the concessional contributions cap by up to $10,000 with a one-off option to request that these excess contributions be refunded to them. This new refund option will only apply to first time breaches from 1 July 2011.
The changes will give individuals the option to take excess concessional contributions out of their superannuation fund and have them assessed as income at their marginal rate of tax, rather than the excess concessional contributions tax rate of 31.5% (in addition to the 15% contributions tax for the fund).
The Government expects that this reform will help to reduce the number of occasions where the concessional contributions are exceeded resulting in an excess contributions tax (ECT) assessment.
Concessional contributions generally include employer contributions (those made under salary sacrifice arrangements and super guarantee contributions) and personal contributions for which the taxpayer intends to claim a deduction. However, less obvious concessional contribution include notional taxed contributions for defined benefit interests, transfers of certain fund reserves and payments by employers of fund expenses (eg life insurance premiums).
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The Government announced in last years budget that the the indexation applied to the income threshold for which the superannuation co-contribution is paid will freeze for 2 years until 2011-12, this has been extended to 2012-13.
Under the superannuation co-contribution scheme, the Government provides a matching contribution for contributions made into superannuation out of after-tax income. The matching contribution is up to $1,000 for people with incomes of up to $31,920 in 2010-11 (with the amount available phasing down for incomes up to $61,920). This measure will freeze these thresholds at $31,920 and $61,920.
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The minimum annual payment amounts for pensions and annuities will be reduced by 25% for 2011-12 and will return to normal in 2012-13. In this respect, the Government will begin to phase out the 50% pension drawdown relief that has been provided for 2008-09, 2009-10 and 2010-11 financial years.
Reducing the minimum payment amounts by 25% for account-based, allocated and market linked (term allocated) pensions from 1 July 2011 seeks to provide some assistance to holders of these products to recoup capital losses incurred as a result of the global financial crisis. This measure has an estimated cost to revenue of $7m over 2 years and is also expected to increase Government expenditure by $9m in 2011-12 through higher pension outlays.
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The Government announced other superannuation measures including:-
- superannuation on payslips - the Government will ensure that employees receive information on their payslips about the amount of superannuation actually paid into their account. Employees and employers will also receive quarterly notification from their superannuation fund if regular payments cease, with effect from 1 July 2012;
- use of TFNs for superannuation - Super fund trustees and RSA providers can use tax file numbers to locate member accounts and facilitate consolidation of multiple member accounts (as per the Government’s Stronger Super reforms), with effect from 1 July 2011;
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