Superannuation changes from 1 July 2007

Superannuation changed in July 2007. The Government announced changes to simplify and streamline Superannuation. We’ve tried to highlight these changes below to help you understand the implications of these changes:

Retirement and your Superannuation

Superannuation benefits paid from a taxed fund, either as a lump sum or as an income stream such as a pension, will be tax free for people aged 60 and over.

Benefits paid from an untaxed scheme will still be taxed, although at a lower rate than they are now for people aged 60 and over.

If, under the law, you are presently allowed to retire and access your super before age 60, your right to do so will not change, but you will be taxed on your benefits under new simplified rules.

From 20 September 2007 the pension 'assets test' taper rate was halved to $1.50 per fortnight for every $1,000 of assets above the assets test free area. (This means from September you may be able to have a greater level of assets and still be entitled to the age pension).

Reasonable Benefit Limits (RBLs) will be abolished

Superannuation changes in September 2007 allow you to have greater flexibility as to how and when to draw down your superannuation in retirement. Super funds will no longer be forced to pay benefits.

You will be able to make deductible super contributions up to age 75, but limits apply to how much you can contribute.

Before Tax Superannuation Contributions

Prior to July 2007, employer contributions to superannuation funds were taxed at a concessional tax rate of only 15%.

Under the new regime, your total concessional contributions are limited to $50,000 per year, taxed at 15%. This will include any money you contribute through salary sacrificing.

Before-tax contributions exceeding this limit are taxed at your highest marginal tax rate (plus Medicare levy).

Concessional contributions for individuals aged 50 or those that will turn 50 between 2007-08 to 2011-12 are limited to $100,000 per year.

After Tax Superannuation Contributions

Prior to July 2007, employer contributions to superannuation funds are taxed at a concessional tax rate of only 15%.

You were able to contribute an unlimited amount of your own money after tax at any time, up to a certain age, to your superannuation.

Under the new proposals, after tax contributions are limited to $150,000 per year.

After tax contributions exceeding the limit are now taxed at the top marginal tax rate (plus Medicare levy).

Individuals under 65 wanting to make larger contributions are allowed to bring forward two years of contributions. For example, you can contribute $450,000 in 2007-08 but will then be unable to make further after tax contributions until the 2010-11 financial year.

Contact us for more information about maximising your payments into Superannuation and reducing your tax liability.

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