More progressive tax rate for employer contributions to super savings

Employees earning less than $9,500 a year and belonging to an employment based super scheme may have the employer payments to their funds taxed at just 15 per cent under changes proposed to the taxation bill now before Parliament.

Revenue Minister Michael Cullen said today that he had written to the Finance and Expenditure Committee seeking the amendment after representations from the Green Party.

“Although there are not likely to be many people affected, it seems a sensible and fair measure as it is important that super contributions are taxed at a rate which will not discourage savings.

“Currently all contributions are taxed at a flat 33 per cent, regardless of the employee’s income. That overtaxes people earning under $38,000 a year.

“The Bill addresses this problem by allowing employers to apply a 21 per cent rate on behalf of employees earning under $38,000. That principle will now be extended to those on the lowest, 15 per cent tax bracket.

“Contributions made on behalf of employees earning over $38,000 will remain at 33 per cent,” Dr Cullen said.

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