Just sent to me from Esuperfund. All the changes that Swanee has made to superfunds that affect us:
Change 1 - Concessional Contribution Caps
Everyone's Concessional Contribution cap (ie your employer's contribution, salary sacrifice contributions and contributions by a self-employed person claiming a tax deduction) will be $25,000 from 1 July, 2012. This is irrespective of age. More on Concessional Contributions can be found here. Non Concessional Contribution Caps remain unchanged.
Change 2 - Additional 15% tax on Concessional Contributions for high-income earners
Those earning more than $300,000 a year will have their Concessional Contributions taxed at 30% rather than the standard 15%. The definition of 'income' under the new rules will be: Taxable income + concessional contributions + adjusted fringe benefits + total net investment losses.
Importantly Concessional Contributions (ie your employer's contribution, salary sacrifice contributions and contributions by a self-employed person claiming a tax deduction) will count as income. For example, if your taxable income is $280,000 and your employer makes $25,000 in concessional contributions, you will trigger the threshold because your income will be assessed as $305,000 (ie $280,000 + $25,000 = $305,000). The additional tax of 15% (30% in total) will apply to those concessional contributions that take your income over $300,000, which in this case is on the extra $5,000.
More importantly, income includes investment losses including losses on borrowing money to buy shares or from negatively geared property. For example assume your taxable income is $200,000, which has been calculated after deducting a net $90,000 loss on investment properties. You also receive $10,000 in fringe benefits, and your employer makes super contributions of $18,000. Under the new rules your income is $318,000. This is $18,000 above the $300,000 income trigger, which means your concessional contributions will now be taxed at 30% instead of 15%.
Change 3 - Government Co-Contribution reduces to a Maximum of $500
For the next financial year (2013 Financial Year) the government co-contribution reduces to a maximum of $500 for a low-income earner who makes a personal super contribution. The matching rate also reduces to 50%, so to get the maximum $500 co-contribution, the personal super contribution will need to be $1,000. There is no change to the income threshold (the person's income has to be under $31,920 to get the maximum co-contribution), however as the benefit has been cut to $500, it phases out completely once the person's income exceeds $46,920. More on Co-Contributions can be found here.
Change 4 - Low income earners won't pay contributions tax
The one positive change is the Low Income Superannuation Contribution (LISC). Effectively, a person whose income is less than $37,000 will have the contributions tax on concessional contributions returned to their Fund, meaning they won't pay any contributions tax. Worth a maximum of $500 (15% of 9% of $37,000), the Australian Taxation Office (ATO) will pay the LISC to the SMSF. Like the co-contribution, a key eligibility requirement is that at least 10% of the person's income must come from employment.
Other Changes - Off Market Transfers
The Australian Taxation Office has issued a media release on 28 March 2012 confirming that you will no longer be able to transfer Shares from outside a SMSF to a SMSF (commonly known as Off Market Transfers or In Specie Transfers). This means that the Shares will need to be sold and the funds transferred to your SMSF. Your SMSF will in turn need to buy the Shares again in the SMSF name.
The Government believes that the current system allowing for Off Market Transfers is not transparent and in some cases does not meet the arm's length test which can lead to abuse of the current system. This can occur through the manipulation of a transaction date and or asset value to achieve a more favourable outcome in terms of contribution caps and capital gains tax.
The measures will commence on 1 July 2012, so any Member looking at transferring Shares to their SMSF should do so prior to 30 June 2012.
Actions to take before 30 June 2012
If you are over 50 and eligible to make Concessional Contributions, this is the last chance to take advantage of the higher $50,000 Concessional Contributions cap. Talk to your employer about salary sacrificing, or if self-employed, make tax-deductible contributions. You have until 30 June and be careful not to exceed the cap!
The Government Co-contribution is still $1,000 in the current 2012 Financial Year, and the matching rate is 1:1 (ie the Maximum Co-Contribution is $1,000 this Financial Year). The maximum benefit is payable if the person's income is under $31,920 for the current Financial Year and phases out completely once income exceeds $61,920. At least 10% of the Members income must come from employment. From next Financial Year as detailed above the maximum will fall to $500. More on Co-Contributions can be found here.
If you wish to make an Off Market Transfer to your SMSF without the need to sell Shares and repurchase them in the name of the SMSF, you will need to do so prior to 30 June 2012. After this date you will no longer be able to make an Off Market Transfer (in specie contribution) and you will be required to sell Shares and repurchase them in the name of the SMSF.
