Superannuation Update Nov 2013
Key superannuation numbers
This is a summary of the key rates and thresholds that impact your Australian superannuation account for the current year ending 30 June 2014. Australia’s superannuation laws are complex so please always seek advice on your particular circumstances.
What you need to know:
Taxing of benefits paid
Taxation of superannuation pensionsThe following rates generally apply to pensions received from taxable, private sector funds:
Age 60 or above Not taxed
Above preservation age to age 60 Taxed at marginal rates with 15% offset
Under preservation age (if permitted) Taxed at marginal rates
The Medicare Levy applies to taxable payments. Different rules apply to certain public sector funds and overseas funds.
Taxation of superannuation lump sums
The following rates generally apply to lump sums received from taxable, private sector funds:
Age 60 or above Not taxed
Above preservation age to age 60
First $180,000 (lifetime limit) Nil
Under preservation age (if permitted) 21.5%
Different rules apply to certain public sector funds and overseas funds.
Taxation of superannuation death benefits
These are generally tax free if paid as a lump sum to a tax dependant (as defined) including your spouse or children under 18.
A lump sum paid to a non-dependant is split into a number of components.The component which largely represents non-concessional contributions is tax free. Other components are either taxed at 16.5% or 31.5%.
Reversionary superannuation pensions are tax free either if the deceased was over age 60 at the date of their death, or the recipient is over age 60. Otherwise the taxable component is taxed at the recipient's marginal tax rate with a 15% tax offset.
Preservation of super entitlements
Your preservation age is the earliest age at which you can normally access your super benefits when you satisfy a condition of release (for example, commencing a transition to retirement pension, retirement or reaching age 65).
Preservation age (years)
Date of Birth
|55||Before July 1960|
|56||1 July 1960 - 30 June 1961|
|57||1 July 1961 - 30 June 1962|
|58||1 July 1962 - 30 June 1963|
|59||1 July 1963 - 30 June 1964|
|60||After 30 June 1964|
Minimum account based pension levels
Where a condition of release is satisfied and an account based pension is started, the minimum pension payment levels for the year ending 30 June 2014 are:
Age at 1 July 2013*
Minimum Withdrawal % of Account Assets**
|65 to 74||5%|
|75 to 79||6%|
|80 to 84||7%|
|84 to 89||9%|
|90 to 94||11%|
|95 or more||14%|
* Or pension commencement date if later
** Based on account balance at 1 July 2013 or pension commencement date if later
Transition to retirement pensions
Transition to retirement pensions have an annual payment limit of 10% of the account balance at 1 July 2013. There are no payment limits on other pensions.
Taxation within the funds
Taxation of superannuation contributions in the fundNon-concessional contributions Not taxed
Concessional contributions (generally) 15%
Concessional contributions (high income earners) 30%
The 30% rate applies where an individual’s total taxable income, concessional contributions within the relevant cap, reportable fringe benefits, net investment losses, target foreign income and tax free government pensions exceed $300,000.
Higher tax rates may apply if the contribution caps are breached.
Taxation of super fund income
The tax rates on income from arm’s length sources are as follows:Generally 15%
Long term capital gains (i.e. over 12 months) 10%
Funds paying complying pensions No tax
Making contributions to Super
Superannuation contribution caps
Where the conditions for contributing to superannuation are satisfied, the contribution limits (caps) are as follows based on your age at 30 June 2013:
Concessional (tax deductible) contribution cap – under age 59 $25,000
Concessional contribution cap – age 59 or over $35,000
Non concessional (ie after tax) contribution cap $150,000
With three year bring forward rule (if under age 65) $450,000
We recommend that you take extreme care if you are planning to maximise your superannuation contributions. The penalties for exceeding the relevant contribution caps can result in total tax rates of up to 93% of the contribution. Only in some circumstances can excess contributions be refunded back to the member.
In general, where a fund member is over age 65, they must be gainfully employed before they can contribute to superannuation. After age 75 only SGC and mandated employer contributions are permitted.
Other contribution opportunities
- A government co-contribution of up to $500 for personal superannuation contributions by an individual whose total income (comprising taxable income plus reportable fringe benefits and reportable employer superannuation contributions) is less than $48,516.
- Spouse contributions tax offset – an offset of up to 30% of eligible contributions on behalf of a low income spouse (total income under $13,800). The maximum offset is $540 for contributions of $3,000 and income under $10,801.
- Spouse contributions splitting - this is generally limited to 85% of concessional contributions and normally has limited relevance. It may become more relevant if the previously proposed $100,000 cap (per member) for tax free earnings of pension funds is introduced. This was to have applied from 1 July 2014.
- Low income superannuation contribution – this is an additional government superannuation contribution of up to $500 where your total income is less than $37,000. The contribution is calculated as 15% of concessional contributions made by you or on your behalf to a maximum of $3,333.
- Small business CGT concession caps - $1,315,000 or $500,000 - only available where a qualifying small business is sold.
Tax deductions for superannuation contributions
Employers are entitled to tax deductions for superannuation contributions made on behalf of employees working in their Australian businesses.
Individuals are entitled to deductions for their personal superannuation contributions providing any income from employment (including reportable fringe benefits and reportable superannuation contributions) is less than 10% of the sum of their total assessable income, reportable fringe benefits and reportable superannuation contributions. Special rules apply to those aged under 18 or over 75.
Departing temporary residents
Departing permanent residents with self-managed super funds
Please contact us for specific advice before you go overseas for an extended period.
Information for employers
Some changes were made to the Superannuation Guarantee Charge (SGC) as at July 1 2013 which include:
The SGC contribution rate increased to 9.25% for salaries and wages paid after 30 June 2013.
The maximum quarterly contribution base is now $48,040.
The SGC age limit was removed from 1 July 2013.
Please contact us if you require more information about superannuation including contributions, pensions, the regulation of self-managed superannuation funds or borrowing to buy real estate in an SMSF.