The Federal Government has, as expected, cut the superannuation tax concessions applying to higher income earners.
The Federal Treasurer, Wayne Swan, has confirmed that the reduced concession will apply to people earning more than $300,000 and will become effective from 1 July, this year.
Filling in the detail of the Budget announcement, the Minister for Financial Services, Bill Shorten, claimed the measure would “make the superannuation system fairer by reducing the higher tax concession that very high income earners receive on their concessional contributions, to align it more closely with the concession received by average income earners”.
“It is clear that a small number of people on high incomes are getting a better tax deal out of super than millions of Australians on average incomes,” Shorten claimed.
The Government proceeded with the measure despite superannuation and financial services industry workings that it was tantamount to reinventing the superannuation surcharge.
Shorten claimed that, currently, the 15 per cent flat tax on concessional contributions provided high income earners with a significantly larger tax concession than those on lower marginal tax rates.
He said that from 1 July 2012, individuals with incomes greater than $300,000 would have the tax concession on their contributions reduced from 30 per cent to 15 per cent (excluding the Medicare levy).
“There will still be an effective tax concession of 15 per cent for these high income earners,” Shorten said.
He said the measure would save $946 million over the forward estimates and affect around 128,000 people in 2012-13, or 1.2 per cent of people contributing to superannuation.
Shorten said the definition of ‘income' for the purposes of the measure would include taxable income, concessional superannuation contributions, adjusted fringe benefits, total net investment loss, target foreign income, tax-free government pensions and benefits, less child support.
If an individual's income excluding their concessional contributions is less than the $300,000 threshold, but the inclusion of their concessional contributions pushes them over the threshold, the reduced tax concession will only apply to the part of the contributions that are in excess of the threshold.
