Federal Budget 2013/14

On 14 May 2013, the Treasurer Wayne Swan handed down the 2013/14 Federal Budget. The super-related announcements are outlined below. Overall there were not many surprises in this year's Budget with many reforms having been flagged previously.

Income tax

Personal income tax rates - 2015 tax-free threshold increase deferred

The already-legislated increase in the tax-free threshold to $19,400 from 1 July 2015 will be deferred. The Government announced that the tax-free threshold change would be deferred "until such time as the carbon price exceeds $25.40 per tonne".

The increase in the second marginal tax rate from 32.5% to 33% is already legislated and will apply from 1 July 2015.

The proposed amended tax rates and thresholds are summarised below:

Tax bracket

Tax rate

Tax bracket

Tax rate

$0 to $18,200 

0% 

$0 to $18,200

0%

$18,201 to $37,000

19%

$18,201 to $37,000

19%

$37,001 to $80,000 

32.5%

$37,001 to $80,000

33%

$80,001 to $180,000 

37% 

$80,001 to $180,000 

37%

$180,001+

45%

$180,001+

45%

2012/13 2014/15

2015/16

Medicare levy

Medicare levy increase to 2%

From 1 July 2014, the Medicare levy will increase by 0.5% to 2% to fund the $14.3 billion allocated to disability services. This will mean that the top marginal tax rate plus Medicare levy will be 47% from this date.

Medicare levy low-income threshold for families increased

The Medicare levy low-income threshold for families will increase to $33,693 for the 2012/13 income year from 1 July 2012. The additional threshold amount for each dependent child or student will also increase to $3,094.

Super contributions

Increased concessional caps

From 1 July 2013, the concessional cap for those age 60 and over will increase from $25,000 to $35,000.

From 1 July 2014, the concessional cap of $35,000 will apply for those age 50 and over.

Low income super contribution - payments under $20

The eligibility for the low income superannuation contribution (LISC) will be amended to pay individuals with an entitlement below $20. Entitlements under $10 will be rounded up to $10. The LISC effectively refunds (up to $500 per year) the contributions tax paid by a superannuation fund on concessional contributions for people with incomes up to $37,000.

Extra 15% contributions tax for incomes above $300,000

Individuals with incomes greater than $300,000 will pay an additional 15% tax on their concessional superannuation contributions. This means that concessional contributions made in 2012/2013 by these individuals will be subject to 30% contributions tax.

Change to the taxation of excess concessional contributions

From 1 July 2013, excess concessional contributions will be taxed at an individual's marginal tax rate, plus an interest charge. In addition, individuals will be allowed to withdraw any excess concessional contributions from their superannuation fund.

Pensions

Tax on super pension earnings

Currently no tax is paid on earnings on assets that support super income streams. From 1 July 2014 this will change so that an individual's earnings from a super pension in excess of $100,000 per year will be taxed at 15%. 

Seniors downsizing from family home - means test exemption

The Government will trial a pilot program to provide a means test exemption for Age Pension recipients who are downsizing from their family home. The pilot will commence on 1 July 2014 and be closed from 1 July 2017.

Under the proposal, the family home must have been owned for at least 25 years with 80% or more of the proceeds from the sale (up to $200,000) to be deposited into a special account by an authorised deposit taking institution (ADI). These funds (plus earned interest) will be exempt from pension means testing for up to 10 years provided there are no withdrawals during the life of the account. The exemption will be accessible to people assessed as home owners who move into a retirement village or granny flat; however will not be available to people moving into residential aged care.

Deeming and super pensions

From 1 January 2015, deeming will apply to new super income streams under the pension income test rules. This will not apply to existing pensions unless the member changes products.

Further information

Many of these changes are proposed and have not yet been legislated. We will keep you informed as these proposals are confirmed or if they change. If you have any general queries abut super, please call our Member Centre on 1300 366 216.

Please note information in this Budget Update May 2013 is based on proposed changes announced in the Federal Budget 2013/14 and is subject to legislation being enacted. The information contained in this document is given in good faith and has been derived from sources believed to be reliable and accurate. No warranty as to the accuracy or completeness of this information is given and no responsibility is accepted by VicSuper Pty Ltd or its employees for any loss or damage arising from reliance on the information provided.

On 14 May 2013, the Treasurer Wayne Swan handed down the 2013/14 Federal Budget. The super-related announcements are outlined below. Overall there were not many surprises in this year's Budget with many reforms having been flagged previously.

Income tax

Personal income tax rates - 2015 tax-free threshold increase deferred

The already-legislated increase in the tax-free threshold to $19,400 from 1 July 2015 will be deferred. The Government announced that the tax-free threshold change would be deferred "until such time as the carbon price exceeds $25.40 per tonne".

The increase in the second marginal tax rate from 32.5% to 33% is already legislated and will apply from 1 July 2015.

The proposed amended tax rates and thresholds are summarised below:

Tax bracket

Tax rate

Tax bracket

Tax rate

$0 to $18,200 

0% 

$0 to $18,200

0%

$18,201 to $37,000

19%

$18,201 to $37,000

19%

$37,001 to $80,000 

32.5%

$37,001 to $80,000

33%

$80,001 to $180,000 

37% 

$80,001 to $180,000 

37%

$180,001+

45%

$180,001+

45%

2012/13 2014/15

2015/16

Medicare levy

Medicare levy increase to 2%

From 1 July 2014, the Medicare levy will increase by 0.5% to 2% to fund the $14.3 billion allocated to disability services. This will mean that the top marginal tax rate plus Medicare levy will be 47% from this date.

Medicare levy low-income threshold for families increased

The Medicare levy low-income threshold for families will increase to $33,693 for the 2012/13 income year from 1 July 2012. The additional threshold amount for each dependent child or student will also increase to $3,094.

Super contributions

Increased concessional caps

From 1 July 2013, the concessional cap for those age 60 and over will increase from $25,000 to $35,000.

From 1 July 2014, the concessional cap of $35,000 will apply for those age 50 and over.

Low income super contribution - payments under $20

The eligibility for the low income superannuation contribution (LISC) will be amended to pay individuals with an entitlement below $20. Entitlements under $10 will be rounded up to $10. The LISC effectively refunds (up to $500 per year) the contributions tax paid by a superannuation fund on concessional contributions for people with incomes up to $37,000.

Extra 15% contributions tax for incomes above $300,000

Individuals with incomes greater than $300,000 will pay an additional 15% tax on their concessional superannuation contributions. This means that concessional contributions made in 2012/2013 by these individuals will be subject to 30% contributions tax.

Change to the taxation of excess concessional contributions

From 1 July 2013, excess concessional contributions will be taxed at an individual's marginal tax rate, plus an interest charge. In addition, individuals will be allowed to withdraw any excess concessional contributions from their superannuation fund.

Pensions

Tax on super pension earnings

Currently no tax is paid on earnings on assets that support super income streams. From 1 July 2014 this will change so that an individual's earnings from a super pension in excess of $100,000 per year will be taxed at 15%. 

Seniors downsizing from family home - means test exemption

The Government will trial a pilot program to provide a means test exemption for Age Pension recipients who are downsizing from their family home. The pilot will commence on 1 July 2014 and be closed from 1 July 2017.

Under the proposal, the family home must have been owned for at least 25 years with 80% or more of the proceeds from the sale (up to $200,000) to be deposited into a special account by an authorised deposit taking institution (ADI). These funds (plus earned interest) will be exempt from pension means testing for up to 10 years provided there are no withdrawals during the life of the account. The exemption will be accessible to people assessed as home owners who move into a retirement village or granny flat; however will not be available to people moving into residential aged care.

Deeming and super pensions

From 1 January 2015, deeming will apply to new super income streams under the pension income test rules. This will not apply to existing pensions unless the member changes products.

Further information

Many of these changes are proposed and have not yet been legislated. We will keep you informed as these proposals are confirmed or if they change. If you have any general queries abut super, please call our Member Centre on 1300 366 216.

Please note information in this Budget Update May 2013 is based on proposed changes announced in the Federal Budget 2013/14 and is subject to legislation being enacted. The information contained in this document is given in good faith and has been derived from sources believed to be reliable and accurate. No warranty as to the accuracy or completeness of this information is given and no responsibility is accepted by VicSuper Pty Ltd or its employees for any loss or damage arising from reliance on the information provided.