The Labour Government has announced a number of superannuation measures as part of its mid-year economic and fiscal outlook.
The Low Income Superannuation Contribution (LISC), which will see people earning up to $37,000 paying effectively no tax, and low income workers won’t have to fill out a tax return form. The tax office will instead use available data to verify their income. This appears to be a good development and use of technology, except for the impact on some of Australia’s largest companies now being less competitive in the global marketplace.
According to the government, more than half of the revenue raised from the new carbon tax on Australia’s biggest polluting companies, will be redirected to Australians in the form of tax cuts (for taxpayers) and a Clean Energy Supplement (for Age Pensioners and others). The tax cuts and supplement are designed to compensate Australians for the expected cost increases that will be passed onto consumers when the carbon tax is introduced from July 2012.
Superannuation Minister Bill Shorten said the new tax structure “is particularly useful given that the increase in the tax free threshold from $6,000 to $18,200 from 1 July 2012 will free around one million low-income earners from needing to lodge a tax return”. Note, that along with the increase in “nil tax” threshold to $18,200, the Low Income Tax Offset “LITO” has been reduced to $445. The combined effect is that no tax is payable up to an income of $20,542. However, once you earn over $18,200 the new tax rate is 20.5% compare to 16.5% (inc Medicare Levy) on the 2011-2012 tax tables:
ATO Tax Rates 2012-2013 Year (Residents)
| Taxable income | Tax on this income* |
| 0 – $18,200 | Nil |
| $18,201 – $37,000 | 19c for each $1 over $18,200 |
| $37,001 – $80,000 | $3,572 plus 32.5c for each $1 over $37,000 |
| $80,001 – $180,000 | $17,547 plus 37c for each $1 over $80,000 |
| $180,001 and over | $54,547 plus 45c for each $1 over $180,000 |
*Plus Medicare Levy as applicable.
“The net result of these changes is that an additional 100,000 individuals earning up to $37,000 will now receive the LISC, bringing the total number of low income Australians who will receive a boost to their retirement savings to 3.6 million. This includes the superannuation savings of over 2.1 million women, which will be boosted by over $500 million in 2013-14 alone,” said Shorten.
Lets hope that any negative impact on large business profits, employment prospects and economic growth does not offset these benefits.
Grant Chapman
Tags: Labor, tax reform