Super tax to be doubled for high income earners

If the Government raises the super contribution tax to 30% for high income earners in the budget next week, will you be affected?The Government announced to the major media over the weekend that Wayne Swan is going to double the 15% tax on concessional superannuation contributions to 30% for those with adjusted income over $300,000 per annum in his budget speech on 8th May 2012.  


For these purposes, adjusted income is expected to include taxable income, concessional superannuation contributions, adjusted fringe benefits, total net investment loss, some foreign income, tax-free pensions and benefits, less child support.

As a result of the adjusted income definition, a taxpayer with salary income of say $250,000 but with significant negative gearing into property or shares might still be caught by these measures.

The start date for this change is expected to be 1 July 2012 (although it is conceivable that this could be brought forward to budget night – 8 May 2012 – if budget surplus pressures are strong enough).

The 30% tax rate will apply to all concessional superannuation contributions with one exception.  The exception is where the adjusted income threshold of $300,000 is breached by an amount less than your concessional superannuation contributions amount.  In that case, the 30% tax rate will only apply to the concessional superannuation contributions that exceeds the adjusted income threshold.

Whilst it is said this change will affect just 128,000 people nationwide, it is clearly something that, if it impacts you, you may want to consider preparing for now.

Under certain circumstances, those who may not ordinarily have an adjusted income of $300,000 or more may have to be alert to this change.  For example, this could impact investors selling assets such as property or shares which might throw their adjusted income above the threshold (in the year they enter contracts to sell).

The measure will increase the tax on a standard $25,000 contribution by $3,750 per person in a move that is estimated to bring in more than $1 billion in revenue over the period forecast in the budget.
What can you do?  What should you do? 

If you are unsure whether you might be impacted by these measures, contact your Prosperity Adviser for advice, or speak to one of our leading wealth advisers, John Manuel or Gavin Fernando, who work across our Newcastle, Sydney and Brisbane offices.

If you would be affected by these measures, you should consider:

  • Maximising your concessional superannuation contributions for the 2012 year whilst the tax rate is still 15% (if possible, it would be ideal if this could be done prior to the budget announcement on 8 May 2012 in case the expected start date is brought forward); and
  • Other ways to build wealth in superannuation, including property ownership in a self managed superannuation fund.