In a blow to small business, the Government have delivered cuts to superannuation tax concessions in the Federal Budget, expecting to save more than $1 billion next year by halving limits on tax-deductible contributions, and reining back on its co-contribution scheme.
The Government will halve the maximum limit on concessional contributions from $100,000 to $50,000 for those aged 50 or more and from $50,000 to $25,000 for younger investors. The new limits will apply from July 1 and it is expected small businesses and low income earners will be most affected.
Small business owners and women are generally among those who maximize super contributions in an effort to build up their super accounts, and with the Government dropping their co-contribution rates, small business will likely suffer.
The Government will reduce its matching of super contributions by workers earning less than $60,342 from $1.50 for every dollar invested to $1 for the next three years. It will pay a $1.25 co-contribution for a further two years before the full co-contribution comes back in 2014.
This means workers earning less than $30,342 who contribute $1000 from their after-tax income will see their co-contribution cut from a maximum $1500 this year to $1000 for the next three years.
Treasurer Wayne Swan said the cuts were part of “major structural savings to support the long term sustainability of our pension system and the budget more broadly.”