Rich get slugged $380 million on their superannuation contributions   

Date
    November 7, 2015
    Canberra Times

Almost 120,000 higher earners have been hit with extra tax bills of $380 million under changes to superannuation rules, and tens of thousands of Australians have been forced to pay almost half a billion extra tax for stepping over limits on their superannuation contributions.

In its dying days, the Labor Gillard government introduced the extra 15 per cent tax on people earning more than $300,000, which the Coalition government retained.

ATO data shows it issued $378.9 million in assessments and collected $325.8 million of this in 2014-15. This is up from $294 million in assessments the year before, and $217.4 million tax collected.

The tax, known as Division 293, applies to an individual's income and pre-tax superannuation contributions. If these amounts total more than $300,000, the individual is liable to pay the extra 15 per cent tax. (This is on top of the 15 per cent tax on super contributions – resulting in a 30 per cent tax on their super contributions).

The ATO has also separately hit about 113,000 people who exceed limits on how much super contributions they can make with additional tax bills amounting to almost $540 million (although the ATO notes in its annual report that some of the amount will not be known until early 2015-16 when individuals advise the ATO of their non-concessional contributions). While this bill applied to taxpayers across all categories, it is generally wealthier Australians who can afford to salary sacrifice, and therefore may have to pay for excess contributions.

Super contributions limits exist restricting the amount of money people can pump into super at discounted rates. The current limit, or cap, is $30,000 for people under 50, and $35,000 for those over 50.

Pitcher Partners' Perth executive director Julie Strack said a number of her clients had been hit with both the Division 293 tax bill, and the excess contributions tax.
Rich still better off

Many were executive working for large corporations, that may have remuneration packages where additional superannuation is being contributed over and above the compulsory 9.5 per cent. "They are incentivised in their packages, with additional superannuation above 9.5 per cent," she said.

"Since they typically already have high salaries above $300,000, they get caught by Division 293. Then, if they are contributing above the superannuation contributions limits, they may also get hit with the excess contributions tax."

She said nevertheless the rich were still better off salary sacrificing. "You're still paying 30 per cent tax on the contribution, compared to 49 per cent (the top marginal tax rate). So there's still some advantages for the rich."

Head of Melbourne-based Marin Accountants, Bernard Marin, agreed that despite both these taxes, the rich still benefit from generous superannuation tax concessions.

He said the GST should rise – with compensation for lower income earners – but at the same time the wealthy needed to be taxed more on super so the system was more equitable. Rather than allow those earning over $300,000 to pay at 30 per cent, they should be taxed at their top marginal tax rate, he said.

The federal government has been urged by the head of its own financial systems inquiry, David Murray, to re-examine the purpose of the superannuation system, including whether it is equitable, and whether it is being used as a tax minimisation tool rather than to save for retirement.

Prime Minister Malcolm Turnbull and Treasurer Scott Morrison have abandoned Tony Abbott's promise not to make changes to superannuation but said any changes to the system will be considered as part of the tax white paper.This would be in addition to considering a possible rise in the GST.

Opposition leader Bill Shorten has also announced superannuation tax concessions for the wealthy would be wound back under a future Labor government.   

Labor would limit the tax-free threshold to superannuation earnings at or below $75,000 in any one year (after that amount is exceeded, a 15 per cent marginal rate would apply where currently there is none applicable). It would also reduce the $300,000 threshold at which the contributions to a super fund attract a 30 per cent rate, to $250,000.

Greens' Adam Bandt has said rather than increase the GST, the Turnbull government should consider having a "millionaire's tax", which would see people earning incomes above $1 million pay an extra 5 per cent marginal tax.   

Dnarever wrote on Nov 7^th, 2015 at 7:02am:


Yes it should probably be more like $75K. Most older people have not spent a long time in super and so have a lot of catching up to do.

Wow, I had read abbott/hokey had cancelled that move by Swan—I have posted to that effect a few times.

If award super is 9.5%(?) then I do not see why anybody gets tax exempted for anything but that first 9.5% of earnings.

Grappler Truth Teller Feller wrote on Nov 7^th, 2015 at 12:17pm:


And then why would anyone invest in super? It gets taxed on the way in, gets taxed on the way out. Has high management fees and you cant get it out when you want to. Meanwhile, in the rest of the investment world you can get the same or better returns, lower fees and the ability to withdraw your own money. The tax advantages are the ONLY reason to invest in super.

Jovial Monk wrote on Nov 7^th, 2015 at 12:06pm:



Let's see currently maximum claimable is $35k, then penalties apply. So everyone over $370k would be paying more that $35k.

What do you propose to do with them?

Jovial Monk wrote on Nov 7^th, 2015 at 1:01pm:



Salary sacrifice is included in the $35k maximum which enables a tax refund. Unless the $100k is an undeducted contribution ( no refund claimed). An undeducted contribution doesn't affect the tax take. It is still subject to 15% contributions tax.

Exceeding the $180k limit-

'Exceeding your contributions cap: If you exceed the non-concessional cap at any time on or after 1 July 2013, you have the opportunity to withdraw your excess contributions from your super fund, rather than paying penalty tax of 49% on those excess contributions. If you choose to retain your excess contributions in your super account, then the excess contributions will be subject to penalty tax of 49%.'

http://www.superguide.com.au/boost-your-superannuation/your-guide-to-non-concess...

mariacostel wrote on Nov 7^th, 2015 at 12:37pm:


Because you get all the advantages till you reach the cap and I would assume that once you reach the cap and it isn't super any more you have access to it and the super rules do not apply.

I would see a cap would be a fairly high number, minimum od 2, 3 Mill or a bit more. An amount that would exceed reasonable usage of superannuation.

I would see this as a means of preventing superannuation being used as tax minimisation, putting say 15 Million into super for example. 

I would think that if you have retirement savings capable of generating an indefinite income of several hundred thousand dollars you probably do not need government assisted savings.

You don't need to be leaning.

Oh, yes!  Regular Jailer's pets, they are!  What I'd give for the chance to be slugged $380 million on super!  Wonderful race, the Liberals...