Are You Aware of the Changes to Superannuation?26-Nov-2013
Over the past 12 months Simeoni has sent a number of reminders and notices in relation to the changes to Superannuation. We have been literally inundated with queries from clients still unclear on these matters.
As follows we provide a summary of the main changes that have occurred:
1) concessional contribution cap
The cap on contributions taxed at the concessional rate of 15 per cent for those over age 60 has increased from $25,000 to $35,000 a year.
It is anticipated the cap will rise to $35,000 from July 1, 2014 for those over age 50. Anyone in a salary sacrifice arrangement with an employer should review their terms to factor in the $10,000 increase.
“Also, those who make personal deductible super contributions should consider maximising the $35,000 deduction if their gross income is $80,000 or more.”
2) super guarantee increase
The superannuation guarantee (SG) rate has increased from 9 per cent to 9.25 per cent for most people.
“While only a small increase, this is an important step in increasing Australia’s compulsory level of super to better reflect retirement needs”. “In addition, the age cap of 70 for SG contributions has been removed. So now, those aged 70 and over earning a salary must have super contributions made by their employer.”
3) excess contributions tax
The harsh penalties for exceeding concessional contributions caps have been reduced.
Before July 1, excess contributions were hit with a penalty tax of 31.5 per cent on top of the 15 per cent contributions tax, effectively taxing the excess sum at 46.5 per cent.
Now, when excess contributions are withdrawn from a super fund, the tax rate will be at the personal marginal tax rate, plus an interest charge (for late payment of tax).
It is important to note the prohibitive tax of up to 93 per cent on excess non-concessional contributions (more than $450,000 over three years) still applies.
4) surcharge Revamped
The much-maligned superannuation surcharge is back, the government has been careful not to actually use the “s word”.
An invention of former treasurer Peter Costello, the original surcharge for high-income earners was scrapped in 2005, as administration costs ate up at least 10 per cent of its revenue.
Nevertheless, from July 1, 2014, those earning over $300,000 a year will pay an extra 15 per cent tax on top of the 15 per cent tax for concessional contributions into super. This will apply to contributions from July 1, 2012.
While the 30 per cent tax rate on concessional contributions is lower than the marginal tax rate for individuals earning $300,000 of 46.5 per cent, the tax saving from making additional contributions up to the concessional cap has been reduced.
5) SMSFs need a registered auditor
From July 1, 2013, trustees must use an approved SMSF auditor registered with the Australian Securities & Investments Commission (ASIC) to audit their fund. This is an important change as many current auditors are not registered with ASIC, so trustees should check this.
6) SMSFs must mark assets to market
SMSF assets must now be revalued at market value in the fund’s financial accounts and statements, starting for the year ended June 30, 2013.
Previously, assessing market value for SMSF assets was only required when a pension started, or if the fund had invested in related-party assets.
7) higher SMSF supervisory levy
The SMSF annual levy payable to the Australian Tax Office has increased from $200 to $321. The new amount of $321 is made up of a $191 levy for the 2013 financial year plus an advance payment of 50 per cent of the levy for the 2014 financial year ($130).
8) SMSF investment strategy must be reviewed
The rules have always required SMSFs to have an investment strategy, but trustees must now review it regularly. ‘Regularly’ would mean at least annually, as well as when there is a change in trusteeship or membership of the fund. The new rules also require trustees to consider whether the trust should hold insurance policies for the members.
9) SMSF assets must be kept separate
Trustees are required to keep assets separate from other assets held by the trustees, members or their associates.
This rule has always been embedded, but [now] it is a specific requirement to make it easier for the ATO to apply penalties on trustees that breach it.
If you require assistance, or if you would like to discuss the potential benefits of setting up a Self Managed Super fund to invest in property or other investments, please do not hesitate to contact the Simeoni specialist team.