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Date of article: 5 June 2009
Last updated: 5 June 2009

Federal budget 2009 - super law changes

The Treasurer, Mr Swan, handed down his second budget with some proposed changes to the superannuation system, including limitation on savings through superannuation.

Outline below are measures that will directly affect trustees and members of SMSF.

Key changes

  • Cut to the concessional contributions cap
  • Temporary reduction of Government co-contributions
  • Minimum pension drawdown relief extended

 

Cut to the concessional contributions cap

Under the current law, the annual concessional contributions cap is $50,000 (with transitional cap of $100,000 for individuals aged 50 and above up to 30 June 2012) and the annual non-concessional contributions cap is $150,000.

Concessional contributions are taxed at the concessional tax rate of 15% in the superannuation fund.

The Government propose to reduce the cap on concessional contributions from $50,000 to $25,000 with effect from the 2009-10 financial year. This cap will be indexed.

The transitional concessional contributions cap will be reduced from $100,000 to $50,000. This cap will not be indexed. From 1 July 2012, the concessional contributions cap for those age 50 and above will revert to the 25,000 cap (or indexed amount at that time).

The annual cap on non-concessional contributions will not change for 2008-09 and 2009-10. From 2010-11, the cap will be calculated as six times the level of the concessional contributions cap, as indexed.

A summary of the above changes are as follows (per financial-year):

Period Concessional contributions (indexed) Transitional Concessional contributions Non-concessional contributions
1 July 2008 to 30 June 2009 $50,000 $100,000 $150,000
1 July 2009 to 30 June 2010 $25,000 $50,000 $150,000
1 July 2010 to 30 June 2011 $25,000 $50,000 6 times indexed concessional contributions cap
1 July 2011 to 30 June 2012 $25,000 $50,000 6 times indexed concessional contributions cap


Individuals will need to carefully monitor their superannuation contributions to ensure they do not exceed the new proposed caps across all superannuation funds. Where the caps are exceeded, excess contributions tax will be imposed (31.5% for amounts exceeding the concessional contributions caps and 46.5% for amounts exceeding the non-concessional contributions caps).

Last chance! The opportunity still exist until 30 June 2009 (2008-09 financial year) to take advantage of the higher caps under the current law - concessional contributions cap of $50,000; transitional concessional contributions cap of $100,000.

 

Temporary reduction of Government co-contributions

From 1 July 2009 (2009-10 financial year), the Government will temporarily reduce the matching rate and maximum co-contribution payable on eligible personal non-concessional superannuation contributions. The matching rate will be:

Year ending Government co-contribution rate Maximum Government co-contribution
30 June 2009 150% $1,500
30 June 2010 100% $1,000
30 June 2011 100% $1,000
30 June 2012 100% $1,000
30 June 2013 125% $1,250
30 June 2014 125% $1,250
30 June 2015 150% $1,500


The Government co-contribution is subject to an income test. The matching rate will reduce where personal income exceeds set thresholds.

Last chance! The opportunity still exist until 30 June 2009 (2008-09 financial year) for those who are eligible to receive the co-contribution to take advantage of the 150% co-contribution rate before 30 June 2009.

 

Minimum pension drawdown relief extended

The Government has provided a temporary relief to the minimum amount of superannuation pension that a retiree is require to drawdown in the 2008-09 financial year. The temporary minimum amount a required to be drawn for the 2008-09 financial-year is half of the minimum amount.

The Government has announced that the current arrangement of half the minimum amount will continue for 2009-10 financial-year.

The minimum pension drawdown relief will apply to transition to retirement pension.

The types of pension covered by this relief are account-based pensions, allocated pensions, and market-linked (term allocated) pensions.

The 2009-10 financial year minimum pension factor:

Age of member Minimum Pension Factor (Ordinary) 2009-10 Minimum Pension Factor
Under 65 4% 2 %
65 - 74 5% 2.5 %
75 - 79 6% 3 %
80 - 84 7% 3.5 %
85 - 89 9% 4.5 %
90 - 94 11% 5.5 %
95 and Over 14% 7 %
     

More information and contacting us

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