Fairer superannuation tax concessions

The Government is committed to ensuring Australia's superannuation system is fair and sustainable. All Australians should be encouraged to save for their retirement, but tax concessions need to be distributed fairly to ensure the sustainability of the superannuation system.

SUPERANNUATION CONTRIBUTIONS

The Government has cut tax on superannuation contributions for 3.6 million Australians on low and modest incomes, including 2.1 million women. Starting from 1 July 2012, the Low Income Superannuation Contribution allows most people with income up to $37,000 to effectively pay no tax on their super contributions by providing a tax cut of up to $500 a year.

The Government has also reduced the tax concession received by very high income earners on their superannuation contributions, to ensure it is more in line with the concession received by average income earners. From 1 July 2012, individuals with income above $300,000 will have the tax concession they receive on their superannuation contributions reduced from 30 per cent to 15 per cent.

The Government will also make excess contributions tax fairer and give individuals greater choice. Excess concessional contributions made from 1 July 2013 will now be taxed at the person's marginal tax rate (plus an interest charge) rather than always taxing them at the top marginal rate. In addition, the new arrangements will give individuals greater choice by allowing them to withdraw any excess concessional contributions from their super fund.

EARNINGS IN THE RETIREMENT PHASE

The Government will also better target the tax exemption for earnings on superannuation assets supporting retirement income streams, by limiting it to the first $100,000 of future earnings for each individual each year. From 1 July 2014, earnings above $100,000 will be taxed at the same concessional rate of 15 per cent that applies to earnings in the accumulation phase.

The Government will also encourage the take-up of deferred lifetime annuities from 1 July 2014, by providing these products with the same concessional tax treatment that applies to superannuation assets supporting income streams. This responds to calls to expand the range of superannuation options available to retirees.

Change in concession for superannuation contributions