You may recall that the former Labor Government introduced legislation to progressively increase the rate of Super Guarantee (SG) from 9% to 12% by 1 July 2019.
The SG rate is currently 9.25% and is due to increase to 9.5% from 1 July 2014.
The Coalition Government have said that they plan to defer the SG increases for two years, meaning the SG rate will remain at the current rate of 9.25% until 1 July 2016.
The Minerals Resource Rent Tax Repeal and Other Measures Bill 2013, which proposed the deferral of the SG increases, failed to pass through the Senate. Given that we are now in June, it is unlikely that new legislation will be introduced in time to defer the increase that will apply from 1 July 2014.
Accordingly, we would encourage employers to increase the rate of SG that is being paid to employees to 9.5% from 1 July 2014 to comply with the law as it currently stands.
If legislation is later passed to defer the SG increases, the extra 0.25% in SG paid from 1 July 2014 will count towards future SG obligations.
Increased contribution caps
Concessional contributions
Depending on a person’s age, the following annual concessional contribution caps will apply from 1 July 2014:
- 49 years or older on 30 June 2014 = $35,000
- 48 years or younger on 30 June 2014 = $30,000
Non-concessional contributions
The annual non-concessional contributions cap will increase to $180,000 from 1 July 2014.
People under the age of 65 are able to utilise the ‘bring forward’ option, which allows them to make non-concessional contributions of up to three times their non-concessional cap over a three year period. This means people under 65 could contribute up to $540,000 in the 2015 financial year provided no additional non-concessional contributions are made in the 2016 and 2017 financial years.
Administrative penalties for Trustees of SMSFs
From 1 July 2014, the ATO will have new powers to take action against people who breach their obligations as trustees of Self-Managed Superannuation Funds (SMSFs).
These new powers include:
- administrative penalties (payable by the trustee(s) personally);
- education directions; and
- rectification directions
Previously, the ATO only had the power to disqualify trustees, or make a fund non-complying – which was seen as somewhat of a ‘nuclear’ option, as it results in members losing nearly half their superannuation benefits to tax.
Administrative penalties
The new administrative penalties will give the ATO the power to issue penalties of up to 60 penalty units (currently $170 per unit) for certain breaches of the SIS Act provisions. This means trustees could be up for penalties as high as $10,200 for breaches such as; loaning money to members, or breaching in-house asset and borrowing provisions.
Importantly, these penalties are payable by the trustee(s) personally, and must not be paid or reimbursed by the SMSF.
Education directions
The ATO will also have the power to issue a written direction requiring trustees to complete a specified course of education, where it reasonably believes that the trustees have contravened a provision of the SIS Act.
The trustees will be required to complete the course within a specified timeframe and provide the ATO with evidence of completion. Failure to do so will result in a penalty of 10 penalty units (currently $1,700).
Rectification directions
Finally, the ATO will have the ability to issue a written direction requiring trustees to take specific action to rectify a contravention of the SIS Act. As with the education directions, the trustees will have a specified timeframe to make the rectification and provide evidence to the ATO. Failure to do so will result in a penalty of 10 penalty units.
