The Tax Laws Amendment (Fairer Taxation of Excess Concessional Contributions) Bill 2013 passed through the House of Representatives on 20 June and was originally flagged in Minister for Financial Services and Superannuation Bill Shorten’s April 5 announcement of the government’s plan for super reform.
Under the current regime, low-income earners pay the top marginal tax rate of 46.5 per cent on inadvertent breaches, which can stem from issues such as delays in employer payments.
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”.
The Institute of Chartered Accountants Australia, which has been advocating for a more “reasonable” approach to excess superannuation contributions, has welcomed the amendment.
“This outcome is a win for common sense and will encourage greater confidence in the superannuation system as a means of saving for a sustainable, self-funding retirement,” said chief executive officer Lee White.
“The existing Excess Contributions Tax (ECT) system unduly penalises individuals who, when trying to save for their retirement, make an inadvertent error in breaching their concessional contributions cap.
Mr White added a sturdy and sustainable superannuation system is vital to Australia’s ageing population.
“[The] legislation offers a good step in building confidence Australians can have in a superannuation system that addresses our future priorities,” he said.
ipac managing director Tim Steele told InvestorDaily the changes were especially important given the majority of breaches recorded were inadvertent. Coupled with the potential for a 93 per cent penalty on contributions that breached both the concessional and non-concessional caps the amendment is a necessary commonsense measure, he said.
