The proposed higher concessional contributions cap for individuals aged 50 and over with superannuation balances below $500,000 will be deferred from 1 July 2012 to 1 July 2014. Accordingly, all taxpayers, regardless of age, will be subject to a concessional contributions cap of $25,000 for the 2012-13 and 2013-14 income years. In 2014-15, the general cap is expected to increase to $30,000 through indexation, and the higher cap would then commence at $55,000 for eligible taxpayers aged 50 and over.
The annual $50,000 concessional contributions cap for those aged 50 and over was due to revert to the lower general concessional contributions cap of $25,000 from 1 July 2012. However, in response to the Henry Report, the Government proposed to allow individuals aged 50 and over with total superannuation balances below $500,000 to continue making up to $50,000 in concessional contributions beyond the scheduled end of the transitional period on 30 June 2012. The higher cap for eligible persons over 50 will not be indexed but instead set at $25,000 more than the general concessional contributions cap.
In early 2012, the Government established a Superannuation Roundtable to consider (among other things) compliance cost issues in relation to the proposed $50,000 concessional contributions cap for those aged 50 and over with less than $500,000 in superannuation. The Minister for Financial Services and Superannuation, Mr Bill Shorten, said the superannuation industry has raised concerns in relation to the cost and complexity involved in administering the $500,000 threshold, and the difficulty some individuals may face in determining whether they are eligible for the higher cap.
Mr Shorten said that deferring the start date of the higher cap from 1 July 2012 to 1 July 2014 will allow implementation to occur in conjunction with changes to superannuation fund reporting and systems that will be occurring under the SuperStream reforms. In addition, Mr Shorten said that individuals will be able to more easily determine whether they are eligible for the higher cap from 1 July 2014, as the Tax Office is developing an online reporting facility that will provide access to comprehensive account balance information from early 2014.
Deferring the start date of the higher concessional contributions cap by 2 years is expected to save $1.46bn over the forward estimates.
Date of effect: This measure will apply from 1 July 2012.
[Thomson Reuters comment: The deferral of the start date for this measure will have significant implications for salary sacrificing arrangements, deductions for personal contributions and transition to retirement (TTR) pension strategies. Taxpayers will need to review their strategies before 1 July 2012 when the concessional contributions cap for those aged 50 and over will drop from $50,000 to $25,000 for 2012-13 and 2013-14.
A taxpayer aged 50 or over on the top marginal tax rate who is currently making full use of the $50,000 concessional contributions cap will effectively pay an extra $7,875 in tax if she or he has to restrict concessional contributions to $25,000 from 1 July 2012, and take the remaining $25,000 in cash salary.]
Source: Budget Paper No 2 [pp 40-41]; Minister for Financial Services and Superannuation press release, 8 May 2012
[WTB 19, 8/5]