Proposed Super Changes

Written and accurate as at: 9 May 2013

If you’ve been following the news over the past month, then you may have noticed the increased discussion taking place about proposed changes to the superannuation system announced by the Labor Government in April 2013. 

While there have been a number of minor changes announced there were three more significant changes that may impact Australian pre-retirees and retirees, which have attracted more media attention than the others.

The first of the changes – taxing earnings on super assets supporting income streams from 1 July 2014 is worth covering in some detail. At the moment in a superannuation pension, all income (interest from bank accounts, share dividends etc.) and capital gains (the increase in value you receive on selling something, compared to the price you paid for it) are tax-free.

The changes announced propose to keep future earnings under $100,000pa tax-free. Earnings above this $100,000 threshold would be taxed at the 15% tax rate that applies to earnings in the accumulation phase of superannuation. As this limit is applied on a per individual basis it means that for those people with multiple pension accounts, the income will be added together and assessed against the limit. How this is to be administered, and what options are available for paying this tax are not clear at this stage. Importantly, the proposed changes will not impact how pension payments made from pension accounts is taxed in your own name.

Whilst these changes may not impact many people from an income perspective, they may impact those individuals that wish to restructure their superannuation assets and as a result of these changes trigger a capital gain. However the Government has announced they will apply special rules to the taxation of capital gains for assets purchased prior to 1 July 2014.

The second major change relates to the treatment of superannuation pensions by Centrelink in relation to the income test from 1 January 2015. 

Centrelink currently applies means testing in the form of an income and assets test to determine the actual amount of Centrelink pension payable for an individual.

For pensions in place today, income from Centrelink is generally determined by the total pension payments expected to be paid over a financial year, less a deductible amount. This deductible amount is Centrelink’s way of acknowledging that part of the pension you receive is money that you have put into superannuation over the years – it’s more like spending your money than earning interest. 

Under the proposal announced the treatment of existing pensions from a Centrelink point of view is to remain the same, however for all new pension purchased from 1 January 2015 the value of the pension would be treated as a financial asset, and subject to the same deeming rules as a bank account or share portfolio. These rules see the first $45,400 for a single pensioner and $75,600 for a pensioner couple of financial investments deemed to earn income at 2.5% per annum and financial investments over these thresholds deemed to earn income at 4% per annum.

The proposed changes could be a blessing or a curse for pensioner retirees as the impact will depend on the level of pension payments drawn and the level of assets supporting the pension.

The third major change announced was the proposal to introduce Higher Concessional Contributions caps, initially for those aged 60 years and over and then for those 50 years and over.

The Government announced this increase to allow people who have not had the benefit of Superannuation Guarantee for their entire working lives to have the ability to contribute more into their superannuation as their retirement approaches. This higher cap will be an un-indexed limit of $35,000 per annum.

Importantly the Government has decided not to proceed with an earlier proposal to limit the higher cap to those aged over 50 with a superannuation balance below $500,000. The proposed new annual concessional contribution caps that will apply over the next few financial years are summarised in the table below:

Financial Year




Standard Concessional Cap




Concessional Cap – ages 50-59




Concessional Cap – ages 60 +




*This is an estimate only based on indexation of the standard concessional contribution cap.

While all these changes have received a lot of media attention over the last month, it is important to note that the changes will need to follow a Federal Parliamentary Process prior to being legislated. Further, with the upcoming Federal Election scheduled for September, it is possible we will see further changes to these proposals yet.