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Date of article: 24 May 2013
Last updated: 24 May 2013

Federal Budget 2013

The 2013 Federal Budget was handed down by the Treasurer on 14 May 2013. No significant additional changes were announced to the superannuation system. The Budget mainly reconfirms a number of announcements made recently by the Government.

In the lead up to the Budget, on 5 April 2013, the Government announced the following super reform:

Tax exemption for pension asset earnings capped at $100,000 – from 1 July 2014, tax exemption for earnings on superannuation assets supporting income streams will be capped to the first $100,000 for each individual, with tax rate of 15% applying thereafter.

Superannuation withdrawal remain tax-free for those aged 60 and over – the Government confirmed that the tax treatment of withdrawals from superannuation fund will continue to remain tax-free for those age 60 and over.

Simplified higher concessional contributions cap – the previously proposed higher contributions cap will be simplified by an unindexed $35,000 concessional cap available to those meeting certain age requirements. From 1 July 2013, individuals aged 60 and over will have a concessional cap of $35,000. Individuals age 50 and over will be able to access the $35,000 contributions cap from 1 July 2014.

Excess concessional contributions tax reform – excess concessional contributions made from 1 July 2013 will be effectively taxed at the individual’s marginal tax rate, plus an interest charge.

Deeming rules to account-based income stream – from 1 January 2015, for the purpose of social security pension income test, superannuation account-based income stream will be assessed under the same deeming rules that apply for other financial investments (such as dividends from shares or interest from term deposits). All products held by pensioners before 1 January 2015 will be grandfathered indefinitely and continue to be assessed under the existing rules for the life of the product.

Deferred lifetime annuities – the Government will encourage the take-up of deferred lifetime annuities by providing these products with the same concessional tax treatment that superannuation assets supporting income streams receive. This will give incentive to purchase these products in the form of insurance for individuals outliving their life expectancy.

Establishment of Council of Superannuation Custodians – the Government will established a Council of Superannuation Custodians to ensure that any future changes to the superannuation system are consistent with an agreed Charter.

Measures announced in the 2012 Federal Budget (8 May 2012) or prior that will take effect from 1 July 2013:

Increase in the Superannuation Guarantee – as widely publicised from 1 July 2013, the Superannuation Guarantee (SG) rate will start to increase from 9 to 12 per cent. The SG rate will increase from 9 to 9.25 per cent from 1 July 2013, and will continue to increase each year until it reaches 12 per cent from 1 July 2019.

Abolishing SG age limit – employees age 70 and over will be able to receive the SG from 1 July 2013. This reform will increase the incentive for workers aged 70 and over to remain in the workforce and further boost retirement savings.

Reduced tax concessions for high income earners (takes effect from 1 July 2012) – the Government announced in the 2012 Federal Budget measures to reduce the tax concessions for high income earners whose 'income for surcharge purposes' exceed $300,000. An extra 15% tax will be payable by individual’s on the amount of the low tax contributions.

Personal income tax

There are no changes to the individual income tax rates and thresholds to be applied from 1 July 2013. However, the pending decrease to personal income tax which would have applied from 1 July 2015 has been abandoned.

Taxable income Tax rate from 1 July 2013
0 – $6,000 Nil
$6,001 – $18,201 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000
$80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000
$180,001 and over $54,547 plus 45c for each $1 over $180,000

Increase in Medicare levy – the Government had announced that the Medicare levy will increase from 1.5 per cent to 2 per cent from 1 July 2014.

Medicare levy surcharge – although there was no further announcements to the change for Medicare levy surcharge it is important to note the threshold that apply from 1 July 2013.

Taxable income threshold range ($) – single Taxable income threshold range ($) – families 2013-2014 Medicare levy threshold (%)
$88,000 or less $176,000 or less 0
$88,001 - $102,000 $176,001 - $204,000 1.0
$102,001 - $136,000 $204,001 - $272,000 1.25
$136,000 or more $272,000 or more 1.5

Education expenses – self-funded education expenses that can be claimed as a tax deduction will be capped at $2,000 per year from 1 July 2014.

Other social security measures – the Government announced that it would replace the Baby Bonus from 1 March 2014 with increase in Family Tax Benefit Part A (FTB Part A). The 2012-13 Budget proposal to increase the FTB Part A will be scrapped.

Child care rebate indexation pause – a 3 years pause on the indexation of the annual cap on Child Care Rebate (CCR). The maximum CCR will remain at $7,500 a year to 30 June 2017.

Seniors downsizing from family home – a pilot program to commence 1 July 2013 will provide means test exemption for up to for Age Pension recipients who are downsizing from their family home. Eligible pensioners who have lived in their own home for at least 25 years will need to invest a minimum of 80% of the surplus sale proceeds, up to $200,000, into a special account. The funds in the account will not be counted for income or asset test for up to 10 years until a withdrawal is made. It is not available to people moving into residential aged age.

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