TREASURER Wayne Swan has repeatedly said that the mining tax will enable more superannuation for working people. No detail has been given on how this might occur and, despite my imagination going into overload, I remain mystified by the supposed connection of the mining tax with superannuation.
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Against this supposition is last week's Tax Word article referring to the 75 per cent reduction in the tax deductible limit for over 50 year olds from July 1. This will act as a disincentive for people to contribute to superannuation savings.
During last week I was reminded of another disincentive to contribute to superannuation that comes into effect also on July 1. For many years the government's co-contribution scheme has existed whereby persons on low taxable incomes could make superannuation contributions that would be matched by the government. This scheme is to be wound back. This is contrary to government claims of wanting to encourage superannuation and assist low income earners.
The scheme enables the government to contribute $1000 if a person with a taxable income less that $31,920 makes a superannuation contribution of $1000 or more to a superannuation fund. The government's co-contribution reduces by 3.33 cents for every dollar of taxable income over $31,920. The result is that people with taxable incomes over $61,920 are not entitled to any co-contribution.
From next July 1, the minimum taxable income will remain at $31,920 but the co-contribution will be halved to $500, resulting in the maximum taxable income threshold reducing to $46,920. Accordingly, this valuable government superannuation benefit will be lost to many low income earners.
Lastly, at Canberra's National Convention Centre from March 14 to 16, the Tax Institute will be holding its 27th National Convention with over 30 of Australia's best tax presenters on a wide range of tax issues. While the convention has special importance to accountants and lawyers who have an interest in tax law, members of the public are invited to attend. Keynote speakers include Chief Justice Robert French, chairman of the Board of Taxation Chris Jordan, Tax Commissioner Michael D'Ascenzo and tax specialists from interstate. Topics include superannuation and estate planning, tax audits, capital gains tax and the application of our domestic and international tax laws. Contact the Tax Institute on 1300 733 842 if you wish to attend.
Michael Bannon is a tax consulting partner at Duesburys Nexia, Canberra
