Age Discrimination Removed

The Federal Government has unveiled its legislation which will allow employees over the age of 70 to continue to receive super contributions. Currently employers have no obligation to make super contributions for workers who are 70 or older. The government had previously vowed to raise the cap to apply only to workers over age 75, but this age bracket has now been removed under legislation put into parliament. 

The changes are contained in legislation that will increase the mandatory employer super contributions from 9 per cent of wages to 12 per cent. The legislation also removes the current 15 per cent tax on superannuation contributions paid by people earning less than $37,000. Mr Shorten has said the boost in super guarantee would add $500 billion to the pool of Australians’ retirement savings by 2035, and some of the savings would fund investment in the economy and infrastructure. Removing the tax on super contributions for people earning less than $37,000 was a critical wealth-creation reform for lower-income earners, benefiting women in particular, Mr Shorten said. 

How this plays out for super fund administration, is in the fine print still to be determined. Super funds will need to wait until personal returns are completed to determine the taxable income of members. Industry and Retail funds take the tax from a members benefit as soon as the contribution is paid to them. Will they continue with this practice, and then be required to refund the tax back to the member. If this is the case, will the member be out of pocket on earnings on that 15% not in their account. 

SMSF’s have an easier task in that tax is not payable and debited from a members account immediately, therefore allowing the taxable income of the member to be determined prior to super fund accounts being finalised. What it does mean though is that close liaison between SMSF administrators and the members personal accountant is now more important than ever to balance and make sure the tax is not imposed incorrectly. 

I am sure we will hear more on this issue in days to come.