Australians with superannuation balances over $2 million dollars face losing key tax concessions, Treasurer Wayne Swan and Financial Services and Superannuation Minister Bill Shorten announced this morning.
Starting July 1, 2014, all new earnings on assets supporting income streams such as superannuation pensions and annuities above $100,000 per year will be taxed at the same concessional rate of 15% that applies to earnings in the accumulation phase, Shorten said.
Treasury estimates that only 0.4% of the projected 4.1 million retirees in 2014 -about 16,000 people- will be affected by the measure as only contributors with about $2 million in superannuation will lose tax concessions.
However, the reform is expected to save about $350 million over the forward estimates period, Shorten said.
"The system should focus upon people who earn average wages and in order to keep the system sustainable, we can't have infinite concessions to an infinite amount of money," he said.
The same treatment will be applied to members of defined benefit funds, including federal politicians, which will save about $6 million over the forward estimates period.
A Council of Superannuation Custodians will be established and it will be charged with assessing future policy against the Charter of Superannuation Adequacy and Sustainability and providing an annual report to the Parliament.
"This measure will take superannuation above policy to ensure that legislators are focused on the long term interest of all Australians," Shorten said.
The Government has decided to bring forward the start date for the new higher cap to July 1, 2013, for people aged 60 and over and it will provide them with an unindexed $35,000 concessional cap opposite to the current $25,000.
From July 1, 2014, the measure will be extended to people aged 50 and over with the general concessional cap expected to reach $35,000 from July 1, 2018.
"The current system penalises individuals with income below the top marginal tax rate and the reform will ensure that people are taxed on excess contributions in the same way as if the had received that money as salary or wages and had chosen to make a non-concessional contribution," Shorten said.
The minister also announced that from July 1, 2014, lifetime annuities will have the same concessional tax treatment that superannuation assets receive.
Measures have been taken to recover lost superannuation accounts and from July 1, 2013, accounts of uncontactable members with up to $2,000 will be transferred to the Australian Taxation Office and interest will be paid at a rate equivalent to Consumer Price Index inflation.