Superannuation Guarantee (SG) contributions (those made by employers) will progressively increase from 9% to 12% following the passing of legislation by the Federal Parliament on 19 March. The SG rate will increase by 0.25% on 1 July 2013 and 1 July 2014 with further increases of 0.5% each year from 1 July 2015 to 1 July 2019.
The age 70 limit that currently applies to SG contributions will also be abolished from 1 July 2013.
The increase in the SG rate and the abolition of the SG age limit are expected to assist more working Australians to achieve a better quality of life in retirement over the long-term and take pressure off the Age Pension.
In separate legislation approved by Parliament, a tax rebate will apply to the 15% contributions tax paid on employer superannuation contributions for people on adjusted taxable incomes of up to $37,000 p.a.
The way this measure will work is that a member’s fund will still deduct the 15% tax on employer superannuation contributions. The Government will then apply a 15% matching rate to the contributions made by or for a member on an adjusted taxable income of up to $37,000 p.a. and pay an annual amount of up to $500 directly to the member’s account.
Currently, people earning less than $37,000 p.a. do not receive any concessional tax benefits from their superannuation contributions because their marginal tax rate is at or below 15%. The low-income superannuation contribution is intended to improve the fairness of superannuation taxation arrangements by effectively returning the tax payable on employer superannnaution contributions made for low-income earners.
The first year of this new measure will be in respect of employer superannuation contributions made in 2012/13 with the first payments to individuals’ accounts expected in 2013/14.