CLIENT UPDATE 3 May 2010
The Henry Tax Review - Superannuation Changes The Federal Government’s response to the Henry Tax Review contains some fundamental changes to the superannuation system in Australia. In short, the changes are as follows: Increase in the superannuation guarantee to 12% Instead of accepting the Henry Review’s proposal to do away with contributions tax, decrease the earnings tax on super balances to 7.5% and make super contributions taxable in the hands of members, the Government will instead increase the superannuation guarantee from 9% to 12%. The increase is to be phased in from 2013-2014. The superannuation guarantee will rise by 0.25% in 2013-14 and again in 2014-15, followed by annual 0.5 per cent increases until the rate of 12% is reached in 2019-2020. Concessional contributions cap Effective from 1 July 2012, workers aged 50 and over will be able to make concessional contributions of up to $50,000 annually, provided they have less than $500,000 in superannuation. Superannuation guarantee age limit Effective from 1 July 2013, the superannuation guarantee age limit will also be increased from 70 to 75. Low-income earner’s contribution From 1 July 2012, a low-income earner’s contribution of up to $500 per year for workers earning up to $37,000 will also be made by the Government. Other important outworkings •
It should also be noted that while the Henry Review recommended that the Government offer an annuity product, the Government has said that it will not become involved directly in the provision of longevity instruments.
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The Government has also ruled out aligning the preservation age with the old age pension age (the effect of this being that many people would not be able to access their super until age 67).
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The promise not to change dividend imputation will also bring further certainty to the industry.
TurksLegal will monitor these changes and keep you up-to-date with the passage of the relevant legislation. Paul Cleary has considerable expertise in the provision of specialist financial services and would be pleased to offer strategic superannuation legal advice.
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For more information, please contact: Paul Cleary Partner Insurance & Financial Services TurksLegal T: 02 8257 5760 M: 0407 052 170 paul.cleary@turkslegal.com.au
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