Superannuation changes

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25 / May / 2010

The government has decided to implement four changes to superannuation.

The first two changes apply to superannuation concessional contributions. The government will introduce a new concessional contribution threshold for low superannuation balance workers aged 50 and over and it will also create a new government contribution for workers who earn less than $37,000 a year.

The second group of measures impact on the superannuation guarantee charge scheme (SGC). The SGC will be increased up to a target level of 12% and it will now apply to workers below 75 years of age.

The changes are outlined in further detail below.

SGC increased to 12%

The government has announced that it will increase the SGC to a maximum of 12% by the 2019/20 financial year. This change was in direct opposition to the AFTS Report which advocated no change to the SGC level (AFTS Report to the Treasurer Part 2 Vol 1 Detailed analysis, p 109). The charge will increase in increments as outlined in the table below.

Income year SGC annual rate Increase from previous year
2009/10 to 2012/13 9% None
2013/14 9.25% 0.25%
2014/15 9.50% 0.25%
2015/16 10% 0.50%
2016/17 10.50% 0.50%
2017/18 11% 0.50%
2018/19 11.5% 0.50%
2019/20 12% 0.5%

SGC cut-out age extended to 75

The entitlement age for the SGC will be lifted for workers, with the cut-out age limit increasing from 70 to 75 years of age. This change will commence in 2013/14 and will align the SGC cut-out age with voluntary and self-employed contributions.

New concessional contribution cap for mature low super balance workers

The concessional contribution cap will be doubled for eligible workers who are 50 years of age and older. Workers who are aged 50 or older and who have superannuation balances of under $500,000 will be able to make contributions of $50,000 per year (indexed annually according to Treasury). The government has referred to the measure as a “catch-up” so it is assumed that workers may not be eligible for the higher cap once their overall superannuation balance exceeds the $500,000 limit — this will be discussed with the superannuation industry. This low balance cap applies from 1 July 2012 and effectively replaces the current transitional cap for workers aged 50 and older which expires on 30 June 2011.

Additional government contribution for low income workers

A new government contribution will apply to low income workers from 1 July 2012. The AFTS Report recommended taxing all superannuation contributions as assessable income in the hands of the individual and providing an offset (Rec 18(a)(c)). However the new measure is a contribution that applies only to workers earning $37,000 or less. The contribution is calculated by applying a matching rate of 15% on concessional contributions made with the maximum contribution payable of $500. The contribution will then be paid into the worker’s superannuation account. As a result of the $500 limit, every dollar of contributions above $3,333 made by low income earners will not be matched by the government.

Ref: Stronger, Fairer, Simpler — Fact Sheets, pp 11–17.