The Australian government announced several reforms to the superannuation system. Key changes include: 1) taxing fund earnings over $100,000 at 15% from July 2014; 2) special tax treatment for capital gains depending on asset purchase date; 3) increasing the concessional contributions cap to $35,000 for those over 60 from July 2013 and over 50 from July 2014. Other reforms extend concessional tax treatment to deferred annuities, apply deeming rules to income streams, protect lost superannuation, and establish a Council of Superannuation Custodians.

1. Summary of
Superannuation Reforms
Announced by Government
5 April 2013

2. It is important to remember…
That these announcements are to be delivered
as part of this year’s Federal Budget.
It is unlikely that these announcements will be
legislated before the September election.

3. General Advice Warning
The information provided in this presentation is general in nature, and as such it
should not be relied upon for making decisions without seeking expert opinion or
personal advice.
Paraplanning Network Australia Pty Ltd disclaims all and any guarantees, undertakings
and warranties, expressed or implied, and shall not be liable for any loss or damage
whatsoever (including human or computer error, negligent or otherwise, by one or
more of the authorities, or incidental or consequential loss or damage) arising out of
or in connection with any use or reliance on the information or advice in this
presentation. The user must accept sole responsibility associated with the use of the
material in this presentation, irrespective of the purpose for which such use or results
are applied.
The information in this presentation is current as at 6th April 2013 and is no
substitute for financial advice.

4. Summary of Changes
• From 1 July 2014, change to tax on earnings within pension phase (including defined
benefit pensions)
• From 1 July 2014, special arrangements on capital gains in pension phase depending on
the purchase date of the asset
• From 1 July 2013, concessional contribution cap of $35,000 for those age over 60
(extended to those age over 50 from 1 July 2014)
• Fairer treatment of concessional contributions in excess of the annual cap
• Normal deeming rules to be extended to superannuation account-based income
streams for the purposes of the Centrelink income test
• Concessional tax treatment extended to deferred lifetime annuities
• Changes to the arrangements for lost superannuation
• Establishment of Council of Super Custodians

5. Changes to Tax on Earnings within
Pension Phase
Tax on earnings on super fund Existing Situation Proposed Situation
assets (from 1 July 2014)
In Accumulation Phase Earnings on super fund assets in Earnings on super fund assets in
accumulation phase are taxed at accumulation phase are taxed at
15% 15%
Supporting income streams Earnings on assets supporting Fund earnings* tax free up to
(Pension Phase) income streams are tax free $100,000** a year. Earnings above
$100,000 taxed at same rate that
applies to accumulation phase
(15%)
*Fund earnings include items such as: dividends on shares, interest on bank accounts and rental income on properties
**The $100,000 threshold to be indexed to Consumer Price Index (CPI) and to increase in $10,000 increments.

6. Special Arrangements on
Capital Gains in Pension Phase
Purchase Date of Asset Proposed Situation
(from 1 July 2014)
Prior to 5 April 2013 The reform* will only apply to capital gains on assets purchased
before 5 April 2013 that accrue after 1 July 2024
From 5 April 2013 to 30 June 2014 Individuals to have the choice of applying the reform* to the
entire capital gain, or only that part that accrues after 1 July 2014
From 1 July 2014 The reform* to apply to the entire capital gain
*”The reform” = Fund earnings tax free up to $100,000 a year. Earnings above $100,000 taxed at same rate that applies to accumulation
phase (15%)

7. Special Arrangements on
Capital Gains in Pension Phase
Super fund owns asset
The reform* to apply to the whole gain
As at 5 Before From 1
April 1 July
30 June July
2013 2024
2014 2014
The reform* will only apply to capital gains on assets purchased
before 5 April 2013 that accrue after 1 July 2024
When an asset is purchased from 5/4/2013 to 30/6/2014, individuals
have the choice of applying the reform* to the entire capital gain, or
only that part that accrues after 1 July 2014

8. Tax on Withdrawals
There are no proposed changes to the taxation
on withdrawals from the superannuation
environment

9. Let’s look at fund earnings
In the release, the government mentioned:
“For superannuation assets earning a rate of
return of 5%, the reform will only affect
individuals with more than $2million in
superannuation assets supporting income
streams”

10. The earnings rate
The earnings rate within the fund will effect when
the threshold is reached
Super balance Earnings (%pa)
3 5 7 9 11 13 15
$500,000 15,000 25,000 35,000 45,000 55,000 65,000 75,000
$750,000 22,500 37,500 52,500 67,500 82,500 97,500 112,500
$1,000,000 30,000 50,000 70,000 90000 110,000 130,000 150,000
$1,250,000 37,500 62,500 87,500 112,500 137,500 162,500 187,500
$1,500,000 45,000 75,000 105,000 135,000 165,000 195,000 225,000
$1,750,000 52,500 87,500 122,500 157,500 192,500 227,500 262,500
$2,000,000
60,000 100,000 140,000 180,000 220,000 260,000 300,000

11. What about
Defined Benefit Pensions?
In the release, the government mentioned that
there will be a:
“Calculation of notional earnings each year for
defined benefit members in receipt of a
concessionally-taxed superannuation pension.
Where a person's notional yearly earnings exceed
the $100,000 threshold, the amount in excess of
$100,000 will be subject to tax at a rate of 15%.”

12. Changes to Concessional
Superannuation Contribution Caps
Age of member Existing Situation New Proposed New Proposed
Situation (from 1 Situation (from 1
July 2013) July 2014)
Below age 50 $25,000* $25,000* $25,000*
Age 50 – 60 $25,000** $25,000* Unindexed
concessional
contribution cap of
$35,000 pa
Age 60 or over $25,000** Unindexed concessional contribution cap
of $35,000 pa
*Indexed annually with AWOTE and rounded down to the nearest $5,000. Indexation paused in 2013/14. **There was a proposed
higher cap of $25,000 above regular CC cap for individuals age 50 or more with super balances below $500,000 from 1 July 2014. (This
proposal to be scrapped).
*The general concessional cap is expected to reach $35,000 from 1 July 2018.

13. Higher cap for balances above $500K
From 1 July 2014, There was a proposed higher cap of
$25,000 above the regular concessional contribution
cap for individuals age 50 or more with super balances
below $500,000.proposal to be scrapped
This
“The Government has decided not to limit the new
higher cap to individuals with superannuation balances
below $500,000 in light of feedback from the
superannuation sector that this requirement would be
difficult to administer.”

14. Reforming the treatment of concessional
contributions in excess of the annual cap
Existing Situation Proposed Situation
Concessional contributions in excess of the Individuals to be able to withdraw any excess
annual cap are effectively taxed at the top concessional contributions made from 1 July 2013
marginal tax rate (46.5%) rather than the from their super fund
normal rate of 15% and count towards the
Excess concessional contributions to be taxed at
non-concessional contribution cap
the individuals marginal tax rate, plus an interest
Excess concessional contributions of $10,000 charge (GIC)
or less may be refunded and instead taxed at
Will have same effect as if the individual had
marginal rates for first time breaches on or
received the money as salary / wages and chosen
after 1 July 2011
to make a non-concessional contribution

15. Treatment of non-concessional
superannuation contribution caps
No announcement was made in relation to breaches of
non-concessional contribution caps
46.5% penalty tax continues to apply to non-
concessional contributions in excess of the cap

16. Deeming rules to apply to superannuation
account-based income streams
Existing Treatment of Account Based Pension Proposed Treatment of Account Based Pension
under Income Test under Income Test
Income from Account Based Pension assessed From 1 January 2015, standard deeming rules to
using a formula: apply to new superannuation account-based
income streams assessed under pension income
AI – (PP – RCV) / RN
test
Or where no account balance
PP – {(PP – RCV) / RN} x Y Existing products held by pensioners before 1
January 2015 to be grandfathered indefinitely and
AI = Annual income (grossed payment received during year); continue to be assessed under the existing rules for
PP = Purchase prices less any commuted amounts; RCV =
Residual capital value; RN = Relevant number; the life of the product
Y = Years elapsed

17. Deeming rules
Under the income test, financial assets such as bank accounts,
managed funds and shares are deemed to earn a certain rate of
income, regardless of the income actually earned.
Relationship Threshold level Deeming rate on assets
Status
Below threshold Above
threshold
Single $45,400
Couple * $75,600 (combined) 2.5% 4.0%
Couple** $37,800 (each)
As at 20 March 2013
* If at least one of you is getting a pension
** If neither of you is getting a pension

18. Extending concessional tax treatment
to deferred lifetime annuities
“The Government will encourage the take-up of
deferred lifetime annuities (DLAs) by providing
these products with the same concessional tax
treatment that superannuation assets
supporting income streams receive. This reform
to apply from 1 July 2014.”

19. Lost Superannuation
“The Government has put in place a number of initiatives through the ATO to
help reunite members with lost super accounts.”
From 1 July 2013, interest to be paid on all lost super accounts reclaimed from the ATO (at a
rate equivalent to CPI inflation)
The inactive / uncontactable member account balance threshold below which these
accounts are required to be transferred to the ATO to protect them from being eroded by
fees and charges to be increased as follows:
$2,000 – Immediate
$2,500 from 31/12/15
$3,000 from 31/12/16

20. Council of Superannuation Custodians
“The Government will establish a Council of
Superannuation Custodians to ensure that any future
changes are consistent with an agreed Charter of
Superannuation Adequacy and Sustainability.”
“The Council will be charged with assessing future policy
against the Charter and providing a report to be tabled in
Parliament.”

21. Charter of Superannuation Adequacy
and Sustainability
“The Charter will be developed against the principles of:
» Certainty
» Adequacy
» Fairness
» Sustainability
The Charter will clearly outline the core objects, values
and principles of the Australian superannuation system”

22. For more information:
visit: www.paraplanningnetworkaustralia.com.au
email: info@pna.net.au
phone: 0417 051 081 or 0433 880 865
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23. General Advice Warning
The information provided in this presentation is general in nature, and as such it should not be relied upon for making decisions
without seeking expert opinion or personal advice.
Paraplanning Network Australia Pty Ltd disclaims all and any guarantees, undertakings and warranties, expressed or implied, and
shall not be liable for any loss or damage whatsoever (including human or computer error, negligent or otherwise, by one or more
of the authorities, or incidental or consequential loss or damage) arising out of or in connection with any use or reliance on the
information or advice in this presentation. The user must accept sole responsibility associated with the use of the material in this
presentation, irrespective of the purpose for which such use or results are applied.
The information in this presentation is current as at 6th April 2013 and is no substitute for financial advice.
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