Avsuper, the Industry Superannuation Fund which is the default fund for Airservices employees, has issued advice on government legislation changes to superannuation law.
The Commonwealth Government has drafted legislation to increase the Superannuation Guarantee from 9% to 12% of employee’s earnings. If passed, the legislation plans a gradual increase in the SG rates from 2013. The rate will increase by 0.5% per financial year with the full 12% mandated in the 2019/20 financial year.
Avsuper are monitoring the progress of the legislation and have raised concerns with industry lobby groups for higher income earners who may be already be subject to additional tax because of excess concessional contributions. Unless the contribution thresholds are increased in line with the SG rate, more Avsuper members will have to pay extra tax on their super contributions.
The current rules state that you can contribute up to $25000 (or $50000 if you are over 50) at the usual super tax rates (15%) for concessional contributions. Super contributions above these limits will attract an additional tax of 31.5% plus Medicare levy.
The current employer SG contribution rate for Accumulation members employed under the ATC and Supporting Services Collective Agreement is 12.5%. Members under the age of 50 who earn over $200000 per year will be liable for extra taxation on employer contributions. This threshold will be lower if members are salary sacrificing extra into superannuation or have elected to contribute ERB benefits into superannuation. A rough rule of thumb is if you or the employer together are contributing an average of $960 a fortnight to the Accumulation fund you are nearing the $25000 limit.
Defined Benefit members have some provisions to protect them from the excess tax unless they receive large pay increases. There are links to fact sheets at the bottom of this article which will explain the full details.
Other factors to be considered when reviewing contributions include
- Contribution limits apply to an entire financial year.
- The transitional limit of people over 50 applies only until 30 June 2012; after that, the higher limit may apply for low balance members if Government proposals are accepted.
- Contributions count towards your limits in the financial year your fund receives the money, regardless of when the contribution was deducted from your pay.
The only near certainty regarding superannuation is that the government will continue to change the rules. Avsuper have advised they will continue to monitor and keep members informed of legislation progress.
Government Fact Sheet Outlining SG Increase Timeline for more information.