The federal budget provided some superannuation and tax amendments for the coming financial year.
Being close to the end of this financial year, let’s see where you might find relief – or cop it – from July 1.
Firstly, an increase in the standard minimum rate for account based pensions.
Due to the GFC, the minimum rate for account based pensions and market linked income streams have been set at 50% of the ‘standard rate’ since 2008.
From July 1 the minimum rate will move to 75% of the standard rate, so those currently drawing the minimum will need to review their pension or income stream.
Secondly, minors will be ineligible for the low income tax offset (LITO) on unearned income such as dividends, rent, royalties and other property income.
This is to discourage income splitting between adults and children – including through family trusts – reducing the effective tax-free threshold of a minor from $3,333 to $416.
From July 1, many family trusts will need to rethink making distributions of assessable income to minors and investments made in the name of children will need to be monitored closely for potential tax liability.
Thirdly, there will be tax relief for excess superannuation contributions.
This will be a once only opportunity to withdraw excess contributions made from July 1, 2011 and is limited to excess contributions of up to $10,000.
Instead of being subject to excess concessional contributions tax of 31.5% – in addition to contribution tax of 15% within a superfund – refunded excess contributions will assessable at your marginal tax rate.
This measure will act as a once off warning, as subsequent breaches will be subject to penalty tax -an important reminder superannuation contributions should be carefully planned to ensure no breach of contribution limits.
Finally, there’s the flood levy; an extra 0.5% hit for those earning $50,000 – $100,000 and an extra 1% for those earning over $100,000.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL / ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. If you want help with your financial future, we think we’re Australia’s top financial planner.
