Government announce more super change intentions

November 30th, 2011 | thesmsfreview

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The Government announced yesterday some updates to their intentions around changes to super for next year, as part of their mid year economic and fiscal outlook.

1. Low Income Superannuation Contribution

The Government’s low income superannuation contribution (LISC) is aimed at reducing the tax paid on super guarantee contributions (SGC) for low income workers.

Basically, individuals earning up to $37,000 will effectively pay no tax on their SGC from 1 July 2012, as the 15 per cent contributions tax will effectively be refunded into their super fund accounts.

Yesterday the Government announced a few updates:

1. Paperwork will be streamlined such that the ATO will verify an individual’s income using available data. This will help many who qualify for the scheme but don’t need to lodge tax returns due to  their low income.
2. If you receive less than 10 per cent of your income through employment or business, you will not be eligible. This is similar for the co-contribution.
3. You can only receive a payment if your LISC entitlement is at least $20, to reduce administration costs.

The government state that “the net result of these changes is that an additional 100,000 individuals earning up to $37,000 will now receive the LISC, bringing the total number of low-income Australians who will receive a boost to their retirement savings to 3.6 million.”.

Superannuation Co-Contribution Reductions

The downside to the above LISC is that once it begins from 1st July 2012, the government will reduce the matching rate and maximum payment of the voluntary superannuation co-contribution, as they believe the LISC is better targeted to lower income earners (given most will get SGC contributions but cant always afford voluntary contributions,) and that it will benefit over three times as many low-income earners as the current co-contribution.

Concessional Contribution Caps

To also help pay for the LISC, the indexation of the superannuation concessional contributions caps will be frozen for one year in 2013-14.

The Government also state that they are continuing with the consultation process on the issues raised by the super industry in relation to the higher concessional contributions cap for those aged 50 and over.