In media release No 2011/160, issued 29 November 2011, the Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, announced the following changes to superannuation as a result of the Mid-Year Economic and Fiscal Outlook (MYEFO).
Low income superannuation contribution
As the Government has previously announced, individuals earning up to $37,000 will effectively pay no tax on their superannuation guarantee (SG) contributions from 1 July 2012. Under the LISC, the 15% contributions tax will effectively be refunded into their superannuation accounts.
Mr Shorten said:
- The Government will streamline the LISC so that individuals automatically benefit from it without being burdened with extra paperwork. Rather than requiring eligible workers to fill out a tax return or other type of form, the ATO will verify an individual's income using available data. This change will help low-income Australians who do not have to lodge tax returns, but qualify for assistance to boost their superannuation savings. This is particularly useful given that the increase in the tax free threshold from $6,000 to $18,200 from 1 July 2012 will free around one million low-income earners from needing to lodge a tax return.
- Individuals who receive less than 10% of their income through employment or business will not be eligible. This is in line with eligibility criteria for the co-contribution.
- Individuals will only receive a payment if their LISC entitlement is at least $20, to reduce administration costs.
The Government will reduce the matching rate and maximum payment of the voluntary superannuation co-contribution from 1 July 2012, when the new LISC commences.
Specifically, from 1 July 2012, the Government will reduce the super co-contribution by 50% to 50c per $1 contribution, reducing the maximum benefit from $1,000 to $500. The measure also means those earning more than $46,920 will no longer get a partial benefit compared with the current upper income threshold of $61,920.
Concessional contribution caps
The Government will pause the indexation of the superannuation concessional contributions caps for one year in 2013-14.
Specifically, the Government will pause the indexation of the superannuation general concessional contributions cap for one year in 2013-14, so it remains at $25,000. Indexation of the cap will be deferred until 2014-15, when the cap is expected to rise to $30,000.
The pause in indexation of the general concessional contributions cap will also result in a pause in the indexation of the concessional contributions cap for individuals aged 50 and over and the non-concessional contributions cap.
In response to industry feedback, the Government will undertake further consultation on compliance cost issues raised by industry in relation to the higher concessional contributions cap for those aged 50 and over.