Superannuation tax hit looms

AUSTRALIA'S wealthiest income earners look set for a superannuation tax slug in the Federal Budget next week, but it will be business as usual for most people.

Budget could change the way super is taxed Some super contributions could face 15pc tax Low income earners may get tax cut

AUSTRALIA'S wealthiest income earners look set for a superannuation tax slug in the Federal Budget next week, but it will be business as usual for most people.

Speculation increased this week the Government would cut the amount of extra money people can pump into their super.

But too many changes by the new Government could reduce confidence in the super system, according to an industry spokesman.

The existing contribution limits are tipped to halve, with any money above these levels to be taxed at penalty rates instead of the 15 per cent discounted, or concessional, rate that applies now.

Such a move would affect only about 2 per cent of people and help remove a major imbalance that benefits high income earners, according to independent research house SuperRatings.

"It's really only going to affect people at the very top end, where the rules are overly generous," SuperRatings managing director Jeff Bresnahan said yesterday.

"If the Government is looking to change super then it needs to fix it at the top end where all the generosity is.

"You'd have to be earning at least $150,000 to $500,000 a year pre-tax to be able to put $100,000 into your super. So it's not going to affect mum and dad contributors.

"It's not a killer to the average Australian - in fact it won't even touch most of them."

Existing rules allow people over 50 to put up to $100,000 a year into their super and up to $50,000 for people under age 50.

Other changes in the Budget are tipped to include lowering the 15 per cent tax rate to zero on contributions for low income earners.

"The main problem with any changes is that people don't like the Government tinkering with the system all the time," Mr Bresnahan said.

"Every time there is a change it affects the confidence everyone has in the system and they start to question the benefits of locking it away in a system that keeps changing.

"They start to think they won't put too much in their super because they don't know what the rules will be in 15 or so years' time when they have to draw on it.

"From the consumer's point of view, they don't need to stress too much about what might happen in the Budget because their existing savings should be safe.

"Any changes have so far always been only from this point onward, or from July 1 onward - they have never been retrospective changes."