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Back Issue Newsletters
Media
- Managing business succession - Professional Planner by Tony Negline
- Ethical super rules against sole purpose test - Investor Daily
- Bare trusts should use corporate trustees - Investor Daily
- Loans the lifeblood of self-managed funds - The Australian by Tony Negline
- Smart gearing will help cover your assets - The Australian by Tony Negline
- Clients forgiving towards advisers over losses - Money Management by Peter Townsend
- SMSFs vs. POFs - Super Living by Peter Townsend
- The Super Game - The Australian
- Retirees precious capital - Sydney Morning Herald
- Super pension in a financial downturn - SMSF by Michael Hallinan
Super Concessions for Low Account Balance/Low-income Super Investors
18/09/2009
It is suggested by certain super industry bodies that the following changes should be considered to improve the position of low account balance/low income super investors:
- Removal of the $450 monthly salary threshold applying to SG contributions;
- Removal of the 15% contribution tax for low-income earners;
- Higher concessional contribution caps for low-income earners;
- Introduction of a superannuation loading for any system of Paid Parental Leave.
While the superannuation position of low income earners and low account balance members is not the best, the proposals will either achieve very little or be administratively unworkable.
The $450 per month threshold (ie employers do not have to pay SG contributions in respect of a month if the salary for that month is less than $450) is really a measure intended to achieve operational efficiency so that an employer is not required to pay trivial monthly contribution amounts for members.
An employee who earns $449 per month will, by reason of threshold, “lose out” on a gross employer contribution of $486 per year (which, after the fund pays 15% tax on the amount, will be $413). In reality this will make such little difference that it is not worth pursuing.
The removal of the 15% tax on super contributions for low income earnings will make a significant difference. However such a proposal could not be implemented given the administrative complexity it would entail.
The proposal to have higher concessional contribution caps for low income /low account-balance members is a proposal which falls into the “good idea – simply impossible to implement” category.
The proposal to introduce a super contribution component for paid parental leave may be a good proposal, it is simply an issue of who is to pay the component? The employer? The taxpayer? Also, how is the proposal to be means tested to ensure that the proposal is tightly targeted to the meritorious recipient?