Super changes to hit rich retirees

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Super changes to hit rich retirees

DateApril 5, 2013 – 10:01AM 970 reading now

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Daniel Hurst and Jonathan Swan

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Super changes: Wayne Swan and Bill Shorten.
Super changes: Wayne Swan and Bill Shorten. Photo: Alex Ellinghausen

Australians with more than $2 million in superannuation will lose tax concessions under changes to the system announced on Friday by Treasurer Wayne Swan.

Treasury estimates that about 16,000 people will be affected by this measure in 2014-15, which represents about 0.4 per cent of Australia’s projected 4.1 million retirees in that year.

For superannuation assets earning a rate of return of 5 per cent, this reform will only affect individuals with more than $2 million in superannuation assets supporting income streams.

This reform will save about $900 million over the forward estimates period.

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Under current arrangements, all earnings on assets supporting income streams (superannuation pensions and annuities) are tax-free, in contrast to earnings in the accumulation phase of superannuation, which are taxed at 15 per cent.

However, Mr Swan announced that from July 1, 2014, future earnings (such as dividends and interest) on assets supporting income streams will be tax free only up to $100,000 a year. 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 has been under pressure to detail any changes to superannuation planned for the May budget, with ongoing speculation that it would increase taxes for high earners.

Mr Swan said there was a disproportionate level of government support that flowed to a select few.

”There is something wrong in the system where working Australians on average wages are providing excessive support to people with millions in their superannuation account,” he told reporters.

”Why should someone who has millions of dollars in a superannuation account pay no tax on their earnings while someone on $80,000 a year pays a marginal tax rate of 37 cents in the dollar on every additional dollar they earn?”

Mr Swan said the changes addressed that imbalance.

Superannuation Minister Bill Shorten said the government was acutely aware that many people approaching retirement were keen to boost retirement savings beyond the mandatory contribution.

For people aged over 60, concessional caps will be increased from $25,000 to $35,000 from July 1. That concession would be extended to those aged 50 and over from July 1, 2014.

There will be further changes to the handling of lost super accounts. Last year, the federal government announced lost super accounts up to the value of $2000 would be transferred to the Australian Taxation Office, to protect them from being eroded by fees.

The balances would also earn interest equivalent to the consumer price index once they are reclaimed. The balance threshold will be increased to $2500 from December 31, 2015 and $3000 at the end of 2016.

”This means that rather than shrinking, people who are temporarily disconnected from their super, will have it grow by the time that it’s found,” Mr Shorten told reporters.

A 20-year-old with $3000 in an inactive superannuation account will be able to claim about $3400 from the ATO after five years.

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Read more: http://www.smh.com.au/opinion/political-news/super-changes-to-hit-rich-retirees-20130405-2haim.html#ixzz2PXVItDCc

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