30% concessional contribution tax changes for high income employees

 On 3rd May 2016, as part of its 2016 federal budget, the government made an announcement that, effective from 1st July 2017, it is planning to lower the income threshold from $300,000 to $250,000 for the imposition of additional contribution tax. This decision will result in an increase in the number of tax payers as more Australian will pay the extra 15% on their super contributions. According to the government, this decision will raise an additional $2.5 billion over the course of next four years. According to authorities, only one per cent of superannuation fund members will be affected by this change.

In the present scenario, anyone who is earning more than $300,000 with an ‘income for surcharge purposes’ in a financial year, now on concessional contributions pays 30% tax. The income includes rental property, losses and other items too. The impact is going to be much larger than estimated by the authorities. The 30% of tax for higher income earners result in doubling of the super contributions tax bill, as the cap applies to the income earned by every source not only the salary. You need to understand that it is based on taxable income other than the salary on which the employee decides to work.

The analysts believe that after the imposition of the tax these individuals will have less funds to set aside for retirement. Although, it is considered that higher income earners may not be much affected with these changes, but in reality they are. The employers also do not contribute in Superannuation Guarantee (SG) fund if the annual income of an employee is more than $206480. All together these impositions will make certain that these changes secure the retirements benefits of most of the Australians but at the cost of high income earners!! A more personalised investigation is required to assess true impact of these changes as most of these changes are subject to age.

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