The long awaited Report of the Review into Australia’s Future Tax System (AFTS), chaired by Ken Henry, and the Federal Government’s response to the review, were both released on 2 May 2010.
The Henry report made a total of 138 recommendations, some of which the government has accepted and some of which were specifically rejected. However, the majority of recommendations are yet to be addressed and have been flagged for future reform.
As expected, the Federal Budget handed down on 11 May 2010 formalised the government’s response to the review, and also contained new policy announcements that also affect the superannuation system.
Below are five of the announcements that may have significant impacts on your super:
1. Increased Superannuation Guarantee rate
The government has announced it will increase the Superannuation Guarantee (SG) rate from 9% to a maximum of 12% by the 2019/20 financial year. The increases will be introduced progressively as the table below shows.
| SG Annual Rate |
Income year |
| 9.25% |
2013/14 |
| 9.50% |
2014/15 |
| 10% |
2015/16 |
| 10.5% |
2016/17 |
| 11% |
2017/18 |
| 11.5% |
2018/19 |
| 12% |
2019/20 |
This is great news for members and employers. Naturally, it should help to boost the future benefits of super fund members. While the phased approach and proposed reduction to the company tax rate should help reduce some of the funding burden on employers.
2. Increased Super Guarantee age limit
Currently employers are not required to make SG contributions for employees over the age of 70. From 1 July 2013, however, the limit will increase to 75 years of age.
3. Superannuation Co-contribution matching rate and maximum payable
The government will permanently retain the current matching rate for superannuation co-contributions at 100% up to a maximum of $1,000.
So for every $1 an eligible member puts into super from their own money, the government will match it – 100%.
In addition, the co-contribution income eligibility thresholds will be frozen for two years (2010/11 – 2011/12). That means for the next two years the full government contribution of $1,000 will apply to people with incomes up to $31,920 then phasing down to zero for incomes of up to $61,920.
Previously the co-contribution matching rate was legislated to increase to 125% in the 2012/13 income year and then 150% in the 2014/15 income year. However, this scheme could be complemented by the new additional one-off government contribution for low income earners to help make up for this loss.
4. Additional government superannuation contribution for low income earners
From 1 July 2012, the government proposes to contribute up to $500 into the superannuation fund of workers earning up to $37,000. This is to offset any contributions tax paid on their super contributions. The aim is to reduce the tax paid on super for eligible workers to zero.
5. Higher contribution cap for members over 50
From 1 July 2012, workers aged 50 and over with total super balances of less than $500,000 will be able to make up to $50,000 (indexed) in deductible contributions into their super at concessional tax rates. This extends the current concessional contributions cap of $50,000 (which is not indexed) for those aged 50 and over, which was due to expire on 30 June 2012. This will enable those with lower super balances to catch up and particularly benefit those who have had periods outside the workforce.
Discuss your super strategy with an expert
It’s always important to seek professional – impartial – advice with any financial matters that could affect you.
That’s why HOSTPLUS Executive gives you access to licensed financial planners from Industry Fund Financial Planning (IFFP AFSL 232514). IFFP Planners aren’t paid commissions, so their advice is in your best interests. And you only pay for the advice you need.
What’s more, as a HOSTPLUS Executive member, you’re entitled to a free superannuation financial plan in your first year of membership. Reserve your complimentary appointment today on 1300 799 998.