The Gillard Labor Government will today introduce legislation which allows individuals to withdraw any excess concessional contributions made from 1 July 2013 from their superannuation fund without penalty.
These changes will also make superannuation taxation fairer for low and middle income earners who inadvertently breach the concessional contributions cap because they will be taxed at their marginal tax rate rather than the top marginal tax rate.
The legislation delivers on the superannuation reform measures announced by the Deputy Prime Minister and the Minister on 5 April 2013.
The Tax Laws Amendment (Fairer Taxation of Excess Concessional Contributions) Bill 2013 and Superannuation (Excess Concessional Contributions Charge) Imposition Bill 2013 will improve the fairness of the superannuation system.
At the moment, concessional contributions that are in excess of the annual cap are effectively taxed at the top marginal tax rate (46.5 per cent).
This is a severe penalty for individuals below the top marginal tax rate.
In contrast, individuals on the top marginal rate effectively face no penalty and benefit from being able to defer the timing of their taxation.
The Government’s reforms will ensure that individuals are taxed on excess concessional contributions in the same way as if they had received that money as salary or wages and had chosen to make a non-concessional contribution.
The Government will tax excess concessional contributions at the individual’s marginal tax rate plus an interest charge, rather than the top marginal tax rate.
For the majority of working Australians the concessional cap is set at $25,000.
For those 60 and over from 1 July this year and for 50 and over from 1 July next year, the concessional cap will be set at $35,000
It is estimated that this reform will reduce the tax liability of around 40,000 people in 2013‑14, by around $1,100 on average.
The changes will apply to contributions made on and after 1 July 2013.
These measures will improve the fairness, adequacy and efficiency of Australia’s world-class superannuation system for the future.