New super raises some taxing issues
For most people aged 60 and over who receive super benefits from a taxed source, payment of a benefit as a lump sum or income like a pension will be tax-free.
Michael Rooney of Print Super believes these changes have some positive elements for those within the printing industry, but there are still issues which workers must be made aware of. “There are a number of benefits for members in relation to simpler super, but there is a real concern for members who fail to provide their TFN to their super fund as that may pay a lot more tax on their concessional contributions post 1 July 2007,” he said.
Rooney is referring to the changes from 1 July 2007 where employer contributions made to super accounts without a tax file number will be taxed at the top marginal rate plus the Medicare levy (currently 46.5%). For existing accounts, if the member’s account reaches $1,000 the tax will be withheld at the top marginal rate plus the Medicare levy. For accounts created after 30 June 2007, the $1,000 threshold does not apply and tax will be withheld on all contributions at the top marginal rate plus Medicare levy. To avoid this, employees must provide their tax file number to their super fund.
It is also important to note members will not be able to make non-concessional (i.e. voluntary contributions) to their superannuation fund if they have not provided their tax file number to their fund.
For those people aged under 60, lump sum benefits will comprise of two components, being an exempt component and a taxable component.
Reasonable benefit limits will be abolished for benefits received from 1 July 2007. There are new definitions under the simple super legislation:
Concessional contributions, including employer contributions and personal contributions claimed as a tax deduction by a self-employed person will be subject to an annual cap of $50,000. The age-based limits on deductions that currently exist for these contributions will no longer apply. Employees will be taxed on concessional contributions over the $50,000 cap at the highest marginal rate plus Medicare levy (currently 46.5%). The Australian Taxation Office will levy this tax on the individual, who can then nominate their superannuation fund to release monies to pay the liability.
Contributions tax at 15% will still apply, however the contributions will be 100% tax deductible.for the employer.
Between 1 July 2007 and 30 June 2012, a transitional employer contributions (including self employed) cap of $100,000 will apply for people aged 50 or over.
From 1 July 2007, non-concessional contributions–including personal contributions which are not claimed as a tax deduction– will be subject to an annual cap of $150,000. There will be a ‘bring-forward’ option available, meaning that people under 65 years of age can make non-concessional contributions of up to $450,000 over a three-year period.
These non-concessional contributions will be taxed over the cap at the rate of 46.5%. Between 10 May 2006 to 30 June 2007 a transition period applies, which means individuals will be able to contribute up to $1 million in superannuation.
There are also some new benefits for the self employed, as the self-employed may be able to claim a full tax deduction for their concessional contribution (up to the cap) and may also be eligible for the Government co-contribution (as long as they met the other eligibility criteria).
Individuals should seek financial advice regarding these changes and how they may impact their current arrangements.
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