Illustration: Andrew Dyson
BABY boomers hoping to top up their superannuation before retirement are big losers from the budget. From July 1, their concessional contributions — the ones they get a tax break on — will be limited to $25,000 a year, half the current $50,000 and just a quarter of the $100,000 limit that applied when Labor came to office.
The government will defer a special deal that would have allowed over-50s with less than $500,000 in super to keep contributing up to $50,000. This deal recognised that many older workers had low levels of retirement savings and wanted to increase their super while they were still working.
For the next two years, older workers will now be limited to the $25,000 contributions cap that applies to the broader population.
The government said it was not scrapping the higher cap for the over-50s; merely deferring it until 2014 when changes to super fund reporting and systems would make its implementation easier.
Super funds had raised concerns that by applying the higher cap only to people with super balances of less than $500,000, the government was creating an administrative nightmare and confusion for older workers who were unsure whether they qualified. The industry wanted the government to maintain the higher cap for all older workers, but the government was not prepared to wear the cost.
Instead, it will save an estimated $1.46 billion by restricting older workers to the lower cap until July 1, 2014.
By then, it said, the lower cap would have risen to $30,000 through indexation and the higher cap for the over-50s would likely be reintroduced at $55,000.
The government also confirmed it would raise another $946 million by doubling the tax on concessional super contributions for people earning more than $300,000.
It said the current 15 per cent flat tax rate on contributions provided higher earners with a significantly larger tax benefit than those on lower marginal tax rates and the measure would reduce the tax benefit for higher earners from 30 per cent to 15 per cent (excluding the Medicare levy).
"It is clear that a small number of people on high incomes are getting a better deal out of super than millions of Australians on average incomes," Superannuation Minister Bill Shorten said.
"The government will make the system fairer by ensuring that the tax incentives . . . are more in line across income ranges."
He said the measure would affect about 128,000 people and where super contributions pushed a person's income above $300,000, the higher tax would apply only to the contributions above the threshold.
Treasury said it would consult with super funds on how to implement the increased tax so it would not become an administrative burden on all fund members as occurred with the Howard government's super surcharge.
Super funds will also be asked to chip in to fund the costs of implementing the SuperStream reforms, through a temporary levy on all funds regulated by the Australian Prudential Regulation Authority. superannuation
Poll: Are you happy with this federal budget?
Total votes: 52307.
You will need Cookies enabled to use our Voting Feature.
Poll closed 9 May, 2012
These polls are not scientific and reflect the opinion only of visitors who have chosen to participate.