Update: The AFR is reporting that sources indicate the Government has dropped the plan to reduce the concessional contributions cap and will only reduce the Division 293 threshold to $250,000 – the same level as the ALP policy.
The Government is reportedly considering increasing the number of high income earners paying more contributions tax in the upcoming Federal Budget by lowering the Division 293 tax threshold.
Division 293 increases the tax rate on concessional superannuation contributions for high income earners from 15% to 30%. Reducing the threshold from $300,000 to $180,000 would considerably increase the number of people paying the additional contributions tax.
Lowering the Div 293 threshold to $180,000 would align it with the highest individual marginal tax rate – 45% in the 2015/16 financial year. This means the tax rate on the concessional contributions of high income earners could still be 15% lower than the tax on their other income.
The Labor Party has a policy of lowering the threshold from $300,000 to $250,000.
Labor, which introduced the Division 293 tax when it was last in Government, refers to it as the “Higher Income Superannuation Charge (HISC)”. According to the policy announcement lowering the threshold to $250,000 would affect 110,000 people and save $5.1 billion over 10 years.
“This would more closely align the concessions receive by those on middle incomes with those on very high incomes, so that tax relief for superannuation contributions are distributed more fairly, and sustainably,” says the Labor policy announcement.
The Government is also reportedly considering lowering the concessional contributions cap to $20,000, halving the capital gains discount for super funds and stopping Transition to Retirement pensions.
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