Budget 2012 – How did SMSFs fare ?
With the Federal Budget handed down just a few hours ago, we thought we’d do a quick post on the main items that came through just from a SMSF trustee perspective. Luckily, super has been spared from being tinkered with too much with just a few issues raised.
1. Deferral of higher contribution cap limit
This one’s not going to go down well !
As most of you would be aware, those aged 50 and over have been able to make concessional contributions of up to $50,000 pa instead of the regular $25,000 pa that applies to those under age 50, up until 30 June 2012. The Government had previously announced that it was going to extend this indefinitely into the future, but only for those 50 & over who had less than $500,000 in their super account balance.
Well, they’ve now decided they will defer the start date of the higher concessional contributions cap measure by two years, from 1 July 2012 to 1 July 2014.
This means that for 2012-13 and 2013-14, everyone will only be able to make concessional contributions of up to $25,000 per year. They say that in 2014-15, the general cap is likely to increase to $30,000 through indexation, and so the higher cap by then would commence at $55,000.
For those trustees who had been planning on moving funds into their SMSF over the next few years via the higher concessional contribution cap, this will not be a welcome announcement.
2. Increase in tax rate on concessional contributions for high income earners
Leaving out all the rhetoric around this – the bottom line is that from 1 July 2012, individuals with income greater than $300,000 will have the tax concession on their contributions reduced from 30 per cent to 15 per cent (excluding the Medicare levy).
Which basically means that instead of paying 15% tax on concessional contributions, they will pay 30%. Note that the 15% tax on earnings within the fund does not change. We are not sure how they will actually implement this, however they have stated that they will seek industry consultation on how it should be implemented.