On 19 June 2013, the Government introduced into Parliament the Tax Laws Amendment (Fairer Taxation of Excess Concessional Contributions) Bill 2013 (Tax Laws Amendment Bill) and the Superannuation (Excess Concessional Contributions Charge) Bill 2013 (Super Bill).
The Bills are designed to introduce what the Government describes as a fairer system for the taxation of excess concessional superannuation contributions.
The Government estimates that the proposed regime will affect approximately 100,000 people in 2013-2014 and 40,000 people will have a lower tax liability as a result of the regime.
The concessional contributions cap is $25,000 for the 2013-14 year and this cap will be set at:
Currently, individuals pay excess concessional contributions tax at 31.5% on any excess concessional contributions to their superannuation fund and the fund also taxes the contribution at the concessional rate of 15%. This effectively means that concessional contributions exceeding the annual cap are taxed at the top marginal tax rate of 46.5%. If an individual has exceeded the cap, they may seek a determination from the Commissioner of Taxation to disregard the excess contributions or allocate the excess to another year. However, the Commissioner’s discretion is limited, and a determination can only be made in special circumstances.
This has been a major issue for the superannuation industry as potential effects of the current provisions include:
The amendments in the Tax Laws Amendment Bill, together with the introduction of a charge on excess concessional contributions in the Super Bill, are designed to:
The Tax Laws Amendment Bill amends the Income Tax Assessment Act 1997 and the Tax Administration Act 1953 to:
If an individual chooses to release the full 85% of their excess concessional contributions for a financial year, their excess concessional contributions will have no impact on their non-concessional contributions.
The Super Bill imposes an excess concessional contributions charge on those individuals who have concessional contributions in excess of their annual cap. The charge is:
The amendments are proposed to apply to the 2013-14 income year and subsequent income years. This means the amendments will apply with respect to contributions made on or after 1 July 2013.
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