2011/12 Federal Budget Announcements
The Federal Budget 2011/12 was handed down on Tuesday 10 May 2011. Below is a summary of some of the major announcements made by the Government that affect Superannuation, however, please note that many of the changes announced will require Legislation to be passed.
Tax relief for unintentional breaches of contribution cap rules
The Government has announced that from the 2011/12 financial year and onwards, if a person breaches the concessional contribution cap by less than $10,000 (not indexed) they will have the option to have the excess contributions taken out of their superannuation account and assessed against their marginal tax rate, rather than incurring the additional 31.5% excess concessional contributions tax.
This measure, if passed by parliament, will only apply for first time breaches of the concessional cap and apply for contributions made in the 2011-12 financial year onwards.
Higher pre-tax contribution cap for those over 50 from July 2012
The government announced that from 1 July 2012, it will increase the concessional contribution caps to $50,000 for individuals who are 50 years old or over, where their total super balances are below $500,000.
Reduced minimum payments for account-based pensions
The Government initially provided a 50% pension draw down relief in the 2008/09 financial year to assist account based pension holders to recoup capital losses experienced as a result of the global financial crisis. This measure was extended for the 2009/10 and 2010/11 financial years. It was also announced that for 2011/12 the government pension draw down relief will be reduced further to 25%.
Government co-contribution income thresholds
In last year’s Budget the Government announced that the thresholds applying for co-contributions eligibility will be frozen for 2010/11 and 2011/12. As a result, the maximum co-contribution is only available for those with income levels of up to $31,920 and no co-contribution will be available once the individual’s qualifying level of income reaches $61,920.
In this year’s Budget, the Government has announced that the threshold limits will be frozen for an additional 12 months, now covering 2012/13.
The Government has since made a further announcement in November 2011 that they intend to halve the matching rate from 1 July 2012. The reduced rate will be 50c for every $1 contributed. The maximum contribution will also reduce from $1,000 to only $500. Further, the Government intends to lower the income level thresholds, resulting in fewer people being eligible for a Government Co-contribution.
Super contributions on payslips
In the 2010 Federal Election and in the 2011-12 Federal Budget, the government announced that employees will receive information on their payslips about the amount of super actually paid into their super fund account. Employees will also receive a quarterly notification from their super fund if regular super payments cease.
The intent of these measures is to help employees keep track of their employer's contributions.
If passed by parliament, this new measure will take effect from 1 July 2012.
Super contribution tax rebate for low income earners
The Government announced it will provide a new super contribution tax rebate of up to $500 annually for low-income earners from the 2012-13 income year.
This will apply to concessional contributions (including employer contributions) made by or for individuals with adjusted taxable incomes of up to $37,000 (not indexed).
Stronger Super Measures
- Tax File numbers
From 1 July 2011 superannuation funds will be able to use tax file numbers to locate member accounts and to facilitate the consolidation of multiple member accounts. This measure will also assist superannuation funds to carry out more efficient consolidation of multiple member accounts, with effect from 1 January 2012, if not proclaimed earlier.
- Self Managed Superannuation Fund (SMSF) reforms
The Government announced that it will implement the SMSF reforms including the introduction of a new administrative penalty framework, improved data collection and SMSF registration process, competency requirements for SMSF providers and some tightened restrictions on SMSF investments. The cost of these changes will be funded by an increase in the SMSF levy. Most changes will apply from 1 July 2012.
- Self Managed Super Fund (SMSF) levy increase
In the 2011-12 Federal Budget, the government announced that for the 2010-11 income year the annual self-managed super fund (SMSF) supervisory levy will increase from $150 to $180 dollars. SMSF trustees must pay this levy when they lodge their 2011 SMSF annual return.
The Government announced the introduction of a Flood Levy for individuals earning $50,001 or more. This measure has been announced by the Gillard Government as a one-off tax for the 2011/12 period to assist with the cost of rebuilding areas devastated by the floods and Cyclone Yasi. Payments from superannuation are captured as part of the levy. Further information for individuals is available on the Australian Tax Office website: http://www.ato.gov.au/floodlevy
Work bonus for older Australians
From 1 July 2011, age pensioners who work will be able to earn up to $250 per fortnight above the income threshold before their age pension is affected. Pensioners will be able to accrue a credit of any unused amount of the $250 fortnightly exemption, capped at $6,500.
If you would like more information on any of these changes, please visit the Australian Tax Office website: http://www.ato.gov.au/