May 2013 Newsletter - Special Budget Edition

In this edition:

Welcome

Federal Budget 2013-2014: Impacts on Superannuation

Budget Announcements affecting Centrelink entitlements and families

Budget announcements affecting taxation for individuals and business

The budget confirmed measures previously announced by the government on the 5th of April 2013. Below is a summary of the main changes confirmed in last night's budget.

Contributions tax on Super Guarantee

Draft legislation introducing a higher contributions tax on super guarantee contributions for those earning over $300,000 to be implemented.

Minimum Pension Payments
In response to the global financial crisis, the government provided pension drawdown relief in 2008-09, 2009-10 and 2010-11 by halving the minimum payment amounts. This relief was further extended in 2011-12 and 2012-13 by reducing the minimum payment amounts by 25 per cent. As a result of the budget being silent, it is expected that the minimum payment amount is return to normal in 2013-14.

Superannuation Income Streams
The tax free status of pension phase earnings will be retained, but capped at $100,000 (indexed by CPI) attributed for each individual member. Annual earnings above $100,000 will be taxed at a concessional rate of 15% in the hands of the fund.

Capital Gains Tax will apply to assets (in pension phase) if purchased after 1 July 2014. 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 2014;
• 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.

Increased Concessional Contribution Caps

The government will increase the concessional contributions cap to $35,000 from:

• 1 July 2013 for those age 60 and over
• 1 July 2014 for those age 50 and over

Increases to Superannuation Guarantee Contribution rates

Annual increases to superannuation guarantee contribution rates start from 1 July 2013 when the rate rises to 9.25%, and will continue until 1 July 2019 when the rate will have risen to 12%.

Excess Contributions Tax
The government will increase the ability to refund excess concessional contributions and allowing excess concessional contributions to be taxed at the individual's marginal tax rate regardless of their income or cause of the breach.

Deeming superannuation account based income streams
New superannuation account based income streams starting on or after 1 January 2015 will be assessed under deeming arrangements for centrelink income test purposes.

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