The Government has confirmed an additional tax of 15% (on top of the existing flat 15% rate) on concessional superannuation contributions from 1 July 2012 for individuals whose income exceeds $300,000. Income for this purpose includes not just taxable income but also concessional superannuation contributions (which may include salary-sacrificed contributions) and adjusted fringe benefits received. Concessional contributions would include notional employer contributions for members of defined benefit funds.
In addition to the additional tax mentioned above, the Government also announced a two-year deferral of a higher annual concessional contributions cap for individuals aged 50 and over with superannuation balances below $500,000. Practically, this means the concessional contributions cap applicable to such individuals will reduce (from the current $50,000) to $25,000 (the current cap applicable for those aged under 50) until 1 July 2014. Concessional contributions in excess of the $25,000 cap will be subject to excess contributions tax (and effectively taxed at the top individual marginal tax rate).
The combined effect of the above two announced changes, is to significantly reduce the attractiveness of superannuation. This is especially the case for senior executives aged over 50 with incomes in excess of $300,000.
Source: Pages 40-42, Budget Paper No 2 2012-2013.
Note: Our comments are based on Budget proposals as announced on 8 May 2012. The changes to superannuation outlined here should not be regarded as final until the relevant legislation has been passed.