Henry Tax Review: Swan says no, but yes yes to super

Using the Henry Tax Review as a political decoy, the Federal Treasurer, Mr Wayne Swan announced four major changes to the superannuation rules.

The super news is a very big deal, because the changes, when legislated, should deliver larger retirement balances to more Australians.

The Government’s ‘Stronger, Fairer, Simpler: Tax Plan for our Future’ superannuation reforms smacks of a Federal Budget announcement, except that we have received the news on 2 May 2010, nine days early.

The superannuation changes are:

• Superannuation Guarantee (SG) to increase to 12% (from the current 9%) incrementally from July 2013, with the full 3% increase taking effect by July 2019.
• The maximum age limit for receiving SG will rise to 74 (from the current age of 69), starting from July 2013.
• Refund of contributions tax of up to $500 each year, paid into the super accounts of Australians earning $37,000 or less, to ensure they receive a similar incentive for retirement savings, as Australians on higher incomes, taking effect from July 2012.
• Retaining the $50,000 concessional (before-tax) contributions cap for over-50s, rather than dropping the cap to $25,000 (or the indexed amount applicable) from July 2012. The one condition is that the individual must have less than $500,000 in super when making the contribution.

You can find more details on each of these superannuation changes in separate articles on the SuperGuide website.

Funded by the mining industry

According to Mr Swan, the superannuation reforms will be funded by a ‘Resource Super Profits Tax’ (RSPT), and the use of the word ‘super’ in the tax name has no link to the superannuation system. A third of the tax collected via the RSPT will be used to directly assist the resources sector, in particular, infrastructure spending for the resources sector. One third will be used to provide tax cuts to companies, and tax incentives for small business. The remaining third of RSPT revenue collected will be directed to funding the superannuation changes listed above.

Only the first wave of tax changes

The tax and superannuation changes announced by the Federal Government on 2 May 2010 are part of the first wave of Mr Swan’s reform agenda. He states in a media release that: “In the coming months we will have more to say on a number of other areas considered by the review, especially making tax time simpler for everyday Australians, improving incentives to save and improving the governance and transparency of the tax system. This would represent a full second term agenda.”

You can find more information about the Government’s tax reform agenda on its special tax reform website, (www.futuretax.gov.au).

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