Levy Hits Retirees
People retiring next financial year could find their superannuation payouts hit hard by the Timor Medicare surcharge
People retiring next financial year could find their superannuation payouts hit hard by the Timor Medicare surcharge
Under the threshold assessment rules for the Timor surcharge, one-off payments such as a super benefit could catapult the ordinary taxpayer into the wealthy bracket.
The Association of Superannuation Funds Australia (ASFA) is calling for eligible termination payments (ETPs) to be kept out of the assessment for the surcharge.
“ASFA has no objection to the government adopting this temporary revenue measure,” says ASFA chief executive Philippa Smith.
“However, there are equity problems in the current arrangements, because ‘income’ under the Medicare definition encompasses a wide range of payments, including one-off super benefits and eligible termination payments (ETPs).”
Smith says that someone earning, say, $35,000 per year at retirement, collecting a super payment of $100,000 would have an income, according to the Medicare system of assessment, of $135,000. This would result in them paying a surcharge of $1350.
“It is clearly unfair and inequitable to compel someone in those circumstances to pay the Timor Medicare levy surcharge, given that the ETP is a one-off payment. It falsely places them in the same bracket as those who regularly earn a high income through their employment or the proceeds of investments,” Smith says.
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