Superannuation — Low Income Earners Government Contribution

Measure description

This measure will provide a superannuation contribution of up to $500 annually for individuals on adjusted taxable incomes of up to $37,000 to improve the equity of superannuation taxation arrangements.

The amount payable under this measure will be calculated by applying a 15 per cent matching rate to the concessional contributions made by or for individuals on adjusted taxable incomes of up to $37,000, with an annual maximum amount payable of $500 (not indexed). The amount will be paid into a superannuation account of an individual to directly boost their retirement savings.

Concessional superannuation contributions made from 2012-13 will be eligible for the Government contribution. This will be paid in 2013-14.

Rationale

Currently, as a result of the flat tax rate for all superannuation concessional contributions, low-income earners receive little or no concession.

This measure will improve the equity of superannuation taxation arrangements by effectively returning the tax payable on superannuation guarantee contributions made for low-income earners.

Key facts

The amount will be paid into a superannuation account of an individual to boost their retirement savings directly. The first year of the measure will be in respect of contributions made in 2012-13, with the first payments to individuals' funds expected in 2013-14.

The measure will provide a 15 per cent taxation concession on their superannuation guarantee contributions to individuals who have a 15 per cent personal marginal tax rate. It will also remove the 15 per cent tax penalty that individuals with a zero per cent personal marginal tax rate currently face in relation to their superannuation guarantee contributions.

The superannuation savings of 3.5 million low-income earners will be boosted by $830 million over the forward estimates, and this should lead to higher retirement income outcomes for those benefiting.

Indicative timeline

The Government will consult with the superannuation industry on the details of the measure in due course. A consultation paper will be issued at that time. Concessional superannuation contributions made from 2012-13 will be eligible with the first Government contribution paid in 2013-14.