Federal Budget 2014 removes superannuation penalties

OPINION: People who pump too much money into their super fund by mistake will no longer be slugged with penalties. Anthony Keane explains why.

The Government will allow individuals the option of withdrawing superannuation contributions in excess of the non-concessional contributions cap made from 1 July 2013.

PEOPLE who inadvertently pump too much money into their super fund will no longer be slugged with penalties.

Changes to the controversial Superannuation Excess Contributions Tax rules mean super savers will be able to withdraw their excess contributions rather than have to pay a disproportionate penalty for what may be an innocent mistake.

Baby Boomers nearing retirement often try to inject tens or hundreds of thousands of extra dollars into super to take advantage of its tax-free benefits after age 60, and many who went over the limits in recent years were slugged with Excess Contributions Tax at 46.5 per cent.

“The Government will allow individuals the option of withdrawing superannuation contributions in excess of the non-concessional contributions cap made from 1 July 2013 and any associated earnings, with these earnings to be taxed at the individual’s marginal tax rate,” the Budget papers say.

“Final details of the policy will be settled following consultation with key stakeholders in the superannuation industry.’

The Budget says these changes will have an estimated cost to revenue of $40.1 million over four years.

It says the government will receive $7.9 billion from superannuation taxes in 2014-15.

Compulsory employer super contributions, known as the superannuation guarantee, will rise from 9.25 per cent to 9.5 per cent from July 1 and remain there until June 2018 when it will rise by 0.5 percentage points each year until it reaches 12 per cent.

Other super announcements include giving super the same treatment for the Commonwealth Seniors Health Card income test as it does for the age pension from January next year, and introducing a new superannuation system for new Australian Defence Force members from July 2016.

Originally published as Federal Budget 2014 removes superannuation penalties