Statement 1: Budget Overview (Continued)
Reforms for a fairer superannuation system
The Government is introducing reforms to improve the fairness, sustainability and efficiency of the superannuation system.
- The tax exemption for earnings on superannuation assets supporting income streams will be better targeted, by limiting it to the first $100,000 of annual earnings for each individual and taxing earnings above that threshold at the concessional rate of 15 per cent from 1 July 2014. Equivalent arrangements will be enacted for defined benefit schemes.
- A $35,000 concessional contributions cap will be provided for all people aged 60 and over from 1 July 2013 and for all people aged 50 and over from 1 July 2014.
- The excess contributions tax system will be made fairer by taxing excess concessional contributions at a person's marginal tax rate, plus an interest charge, rather than always taxing them at the top marginal tax rate. Individuals will also be given greater choice by allowing them to withdraw any excess concessional contributions from their super fund.
- Normal pension income test deeming arrangements will be extended to superannuation account‑based income streams assessed from 1 January 2015. Products held by pensioners before 1 January will be grandfathered.
- The take‑up of deferred lifetime annuities will be encouraged by providing them with the same concessional tax treatment that earnings on superannuation assets supporting retirement income streams receive from 1 July 2014.
- The account balance threshold below which lost superannuation accounts are required to be transferred to the ATO will be increased from $2,000 to $2,500 from 31 December 2015, and to $3,000 from 31 December 2016.
These reforms will result in savings to the Budget of around $0.9 billion over the forward estimates period.
In addition to these reforms, the Government will establish a Council of Superannuation Custodians to ensure that future changes are consistent with a Charter of Superannuation Adequacy and Sustainability.
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