catallaxy files

catallaxy in technical exile

Changes to Super

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Maybe its just my perception, but – perhaps as expected – the media coverage of the Budget has focused on “tax cuts for the rich”. Predictable and uninteresting. In my mind, the most exciting aspect of this Budget is the changes to superannuation. By abolishing the exit tax and the RBL, for ever dollar earned over 25,000 the incentive to salary sacrifice into super increases. For those on 150,000+, the effective tax rate can be massively cut from 45% to 15% by paying pre-tax income into super. Sure, there are some limits – otherwise it would clearly be open to abuse.

However, all in all, its an excellent change. Not only does it cut the infamous and outrageous “three dip” tax of superannuation (once when it goes in, when its in there, and when it comes out), but it provides yet another incentive to invest, along with the co-contribution scheme. Superannuation, in my view, is well on its way to being the answer to the ageing of the population. I’ll be interested to see whether these changes alter the fairly accepted position that contributions need to be in the 12-15% range to cover average retirement costs.

Written by Admin

May 10, 2006 at 3:19 pm

Posted in Uncategorized

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