With the election campaign in full swing it will be interesting to see which side of politics can establish its credentials the best when it comes to superannuation.
The Rudd government is facing an uphill battle given the changes it has made. In most cases they have reduced super benefits. Some changes improved superannuation to correct inequities and previous changes they made. In this latter category was the increase in concessional contribution levels for people 60 and over.
Before Labor gained power, the maximum would have been $50,000. As a result of this change, over-59s can contribute up to $35,000.
This increase from $25,000 to $35,000 will apply for the 2014 tax year, while many other changes applied from July 1, 2012, and therefore have an effect for the 2013 financial year.
The measures reducing super benefits and increasing taxation applying from July 1, 2012, outnumber the improvements by two to one. High-income earners who had adjusted taxable income of more than $300,000 for 2013 will effectively pay 30 per cent on some or all of their super contributions. Previously they paid the 15 per cent contributions tax that has applied for more than 25 years.
The increase in the taxation of super contributions for the wealthy will not necessarily apply to all of their super contributions.
Under a complicated calculation method, only that portion of a person's super contribution (after being added to their adjusted taxable income) that exceeds $300,000 will be subject to the new 15 per cent tax. The starting point for working out who will be subject to the increased contributions tax is taxable income for the 2013 year.
Low-income earners with income of less than $31,920 for the 2013 financial year, who made non-concessional after-tax super contributions of $1000 or more, will see their Commonwealth super co-contribution decrease from $1000 to $500. This will mean that since Labor gained office the maximum super co-contribution has dropped from $1500 to $500.
Offsetting this is the new super contributions tax rebate for low-income earners. This rebate has a start date of July 1, 2012, and applies to anyone with income of less than $37,000. The maximum rebate of $500 effectively means that anyone on $37,000 will pay no tax on their compulsory employer super contributions. Someone on less than $37,000, with a mixture of compulsory employer contributions and salary sacrifice contributions totalling $3333, will receive the maximum $500 rebate.
On balance, low-income earners are effectively worse off as a result of the changes to super made by Labor.