The move was outlined by Minister for Financial Services and Superannuation Bill Shorten in his April 5 announcement of the government’s plan for super reform when Mr Shorten said from 1 July 2013 individuals would be able to withdraw excess contributions with no penalty.
In a statement today, Mr Shorten said the changes would make superannuation taxation fairer for low- and middle-income earners who inadvertently breach the concessional contributions cap because they will be taxed at their marginal tax rate rather than the top marginal tax rate.
Under the current regulations, excess contributions are effectively taxed at the top marginal tax rate of 46.5 per cent, which Mr Shorten described as a “severe penalty” for those below the top marginal rate.
Mr Shorten’s statement did not address the loophole whereby those who inadvertently breach both their concessional and non-concessional caps can pay up to 93 per cent tax on part of their contribution.
“The government’s reforms will ensure that individuals are taxed on excess concessional contributions in the same way as if they had received that money as salary or wages and had chosen to make a non-concessional contribution,” he stated.
“The government will tax excess concessional contributions at the individual’s marginal tax rate plus an interest charge, rather than the top marginal tax rate.”
The government estimated the reform would reduce the tax liability of around 40,000 people in 2013/2014, by around $1,100 on average.
***Update***
The Bill was introduced this morning and debate was adjourned after a second reading and adjourned to be reintroduced tomorrow.
