The Government has announced 4 significant reforms for superannuation in response to the release of the Henry Tax Review.
As a result of these reforms the Government expects that 8.4 million Australians will receive an increase in their retirement incomes, including 3.5 million Australians on lower incomes who do not receive tax incentives for saving through superannuation. These 3.5 million lower income earners are expected to have their superannuation boosted by $830 million.
An employee aged 30 today on average weekly earnings, is expected to retire with an additional $108,000 in superannuation.
A female aged 30 today on average weekly earnings, with an interrupted work pattern, is expected to retire with an additional $78,000 in superannuation.
The Government will consult with industry on the implementation of the measures outlined below:
1. Staggered increase to 12% Superannuation Guarantee (SG)
From 1 July 2013, SG for employers will increase as follows:
2013-14 – 9.25%
2014-15 – 9.5%
2015-16 – 10%
2016-17 – 10.5%
2017-18 – 11%
2018-19 – 11.5%
2019-20 and following – 12%
The three year lead in time is to allow employers and employees to factor in these changes to future wage negotiations.
2. Low income earner’s Government contribution
From 1 July 2012 the Government will provide a contribution of up to $500 annually into the superannuation account of individuals on adjusted taxable incomes of up to $37,000.
This effectively refunds all contributions tax that would otherwise be payable on any SG payments made for these individuals.
This will be paid in addition to the co-contribution scheme.
3. $50,000 concessional contribution cap made permanent for eligible members over 50
From 1 July 2012 individuals aged 50 and over with superannuation balances below $500,000 will be able to make up to $50,000 in annual concessional contributions.
This makes permanent the existing transitional concessional contributions cap for these individuals who would otherwise be subject to the lower concessional contributions cap (presently $25,000) from 1 July 2012. However those individuals 50 or over with balances above $500,000 will still be subject to the lower cap from this time.
4. Raising the Superannuation Guarantee age limit from 70 to 75
From 1 July 2013 the SG age cut-off will be raised from 70 to 75 so that employees aged 70 to 74 will be eligible for the first time to have SG contributions paid on their behalf.