Federal Budget 2014-15: Superannuation

Insights

Federal Budget 2014-15

Superannuation

As expected, from a business taxation perspective, the Treasurer has continued to reposition existing tax policies with no major surprises or changes. The more important focus for business will be the White Paper on the Reform of Australia's Tax System, which will provide a longer term considered approach to tax reform and which is due prior to the next election.

The Federal Budget Brief 2014-15

Deloitte insights, May 2014 | 31 pages

Minimal changes to super

The Budget contained only a few changes that will affect superannuation. 

Superannuation Guarantee Contributions to be rephased
A further deferral to the phasing of the increase in the superannuation guarantee (SG) rate was announced as part of the proposed repeal of the Minerals Resource Rent Tax. The current Government’s original proposal was to freeze the rate at the current 9.25 per cent for two years. However, the elapse of time and the failure to have the Minerals Resource Rent Tax repealed, has meant the Government can only effectively freeze the rate from next year’s rate (9.5 per cent); however, it will freeze the SG rate at 9.5 per cent for four years instead of two. The table below shows the currently legislated rates (as introduced by the former Labor Government), the Coalition’s earlier proposal (released in the 2013-14 Mid-Year Economic and Fiscal Outlook on 17 December 2013) and the proposal announced in the 2014-15 Budget.

Superannuation Guarantee rates

From 1 July

Labor Government

%

Coalition original proposal

%

Budget announcement

%

2013

9.25

9.25

9.25

2014

9.50

9.25

9.50

2015

10.00

9.25

9.50

2016

10.50

9.50

9.50

2017

11.00

10.00

9.50

2018

11.50

10.50

10.00

2019

12.00

11.00

10.50

2020

12.00

11.50

11.00

2021

12.00

12.00

11.50

2022

12.00

12.00

12.00


Excess non-concessional contributions
Common sense has prevailed with the Government announcing measures to provide relief against the potential for an “overall tax rate up to a staggering 93 percent” – as acknowledged by the Acting Minister for Finance Senator Mathias Cormann in a media release dated 13 May 2014. For excess non-concessional contributions made from 1 July 2013, an individual will be given the option to withdraw the excess contributions together with any earnings on those contributions and to pay tax at their marginal tax rate on those earnings. No excess non-concessional contribution tax would apply in this case. If the individual does not exercise this choice, the excess non-concessional contributions will be subject to the excess non-concessional contribution tax at the top marginal rate. It is not clear at this stage whether there will be a time limit for the individual to exercise their choice or what the process for the return of contributions and earnings. These are to be settled after consultation with key stakeholders in the industry.

Accumulation only for Defence Force superannuation
New members of the Australian Defence Force from 1 July 2016 will only have accumulation superannuation arrangements available to them instead of the existing unfunded defined benefit scheme. Existing members of the defined benefit scheme will be given the option to change to the accumulation arrangement. Unlike the Superannuation Guarantee rates, the Government’s contribution to the new accumulation arrangement will be 15.4 per cent (increasing to 18 per cent for any period of war-like operations).

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