Just a quick update on some superannuation changes.


Superannuation – Maximum age for Superannuation Guarantee

The age limit for employees eligible to receive superannuation guarantee contributions is to be removed entirely effective from 1 July 2013.
Originally it was proposed to increase the age limit from 70 to 75, however the age limit will now be removed entirely.

As an aside, a superannuation fund can currently only accept contributions in respect of members who are aged under 75 (between 65 and 75, the work test must be met), unless the contribution is a “mandated employer contributions”. As SG contributions are mandated employer contributions, current superannuation legislation will allow for SG contributions to be made for people over 75.
However, unless the legislation is amended to increase the age limit at which superannuation funds can accept non-mandated employer contributions, it is unlikely that other employer contributions including those made under a salary sacrifice arrangement will be able to be made for those aged 75 and over.


Superannuation – Indexation of the concessional contribution caps

Currently the concessional contribution cap of $ 25,000 is indexed in $ 5,000 increments in accordance with the movement in Average Weekly Ordinary Times Earnings (AWOTE). When the concessional contribution cap was halved effective from 1 July 2009, the indexation base was reset.

The Government has announced that indexation will be paused for the 2013-14 financial year, thereby potentially deferring the increase of the concessional contribution cap to $ 30,000 by one year.


Superannuation – Account based pensions – minimum annual drawdown

The current 25% discount applying to the minimum drawdown required to be made from account based pensions will be continued for the 2012-13 financial year. This discount applies to all account based pensions including market linked income streams (term allocated pensions).


Superannuation Co-contribution – reduction

The Government co-contribution currently available to low income earners is to be further reduced from 1 July 2012. The matching rate (currently $ 1 for $ 1) will be reduced by 50% with the maximum co-contribution being $ 500 for people with incomes of up to $ 31,920. The co-contribution will phase out when income reaches $ 46,920.


Superannuation – low income superannuation contributions

The criteria surrounding eligibility to the low income superannuation contribution (refund of contributions tax for people earning less than $ 37,000) has been modified. The LISC will only be payable for individuals who derive 10% or more of their income from employment or for carrying on a business.


Regards

Andy

 

Hi Andy, you seem to have your finger on the pulse as far as Super is concerned, I am wondering if you can offer any advice about my circumstances?

I have a different sort of problem. I'm approaching 60 and have a reasonable amount of Super in a fund. I am contemplating a move to the UK for a few years (open ended) to look after my ailing mother.

I was wondering if I could effectively retire ie. turn super into an allocated pension while I was resident in the UK? I may not find work there.

I've been unable to find much info on this matter, can you help?

Thanks,

Bone

 

Hi Bone

If someone has reached preservation age currently 55 and declares that their intention is to retire permanently from the work force, then they should be able to access their Super monies either as a lump sum or an income stream via an Account Based Pension.

If they cannot declare that they will be retiring permanently from the work force it should still be possible to access up to 10% each year via an Account Based Based Pension.

You will need to consider the taxation implications of doing this both from a UK (and whilst under age 60) OZ perspective.

Hope this helps,

Regards

Andy

 

Tricky Tax Issue

Hi Andy,
Thanks for your quick reply. I have been made aware of the double taxation agreements in place between the UK and Australia. The issue that I cannot resolve is what the tax situation will be if I access the lump sum (after I turn 60) from the UK. Will it be tax free even if I am non resident at that time or will there be some witholding tax liable? Are the rules different for lump sum or account based pension paid to an australian account?
Perhaps you would know of a spedialist I could contact.
Thanks,
Bone

 

Hi Bone

I need to be careful when explaining this to you as without knowing your individual circumstances the information could differ,therefore I will answer generically.

If a person was an Australian permanent resident and leaves Australia the same Australian tax rules apply when accessing the Super/Pension Income stream in relation to someone over 60.

These rules being that over the age of 60 a lump sum withdrawal or income stream is generally tax free.

There are some Super funds like government funds for example that are tax deferred funds or exempt funds and in this case there will be differing taxation implications which is why I have stated generally.

Also this is assuming the funds are all Australian accrued and have not come from foreign Super transfers i.e a UK Pension.

One thing, it may be possible to access an amount of money tax free before the age of 60 from Super and having met a condition of release under the low rate cap, could be another option for you.

Regards

Andy