You may have seen the announcement on Friday 5 April 2013 regarding proposed changes by the federal government to super funds that are paying pensions (pension funds), essentially proposing that they be taxed.
The government has proposed that where the earnings of a pension fund exceed $100,000 per member, it will impose a 15% tax on that part that of the earnings that exceeds $100,000. This is to apply from 1st July 2014.
In addition, it plans to tax capital gains on the sale of pension fund assets. Currently a profit on sale of an investment by a pension fund is tax-free. This is to be applied as follows:
- Assets bought before 5th April 2013 – tax will apply to gains that accrue after 1 July 2024
- Assets bought between 5th April 2013 and 30th June 2014 – you can choose to be taxed on the entire gain or the portion that accrues after 1st July 2014
- Assets bought after 1st July 2014 – all gains are taxable.
The government also plans to increase the maximum concessional (tax deductible) contributions to super from $25,000 to $35,000 as follows:
- From 1st July 2013 for those aged over 60
- From 1st July 2014 for those over 50
Naturally, as there is no legislation, there are currently more questions than answers on how these proposed changes will work, and there is the fact of the looming federal election to keep in mind.