Finance Act 2013
The Finance Act 2013 was signed into law on 27 March 2013. The Act gives effect to the tax measures announced in December’s 2012 Budget. The Act contains legislation to implement measures previously announced, which include:
- Measures to assist the SME sector
- Provisions to facilitate early pension withdrawals of AVC Contributions
- Changes in DIRT rates
- Changes to the Self Assessment regime
- A new urban property refurbishment incentive
- The Real Estate Investment Trust (REIT) regime
The Programme for Government set out a commitment that there would be changes in the area of pensions legislation to ensure that tax relief on pension contributions would only serve to subsidise pension schemes that deliver income of up to €60,000 per annum.
In his Budget 2013 speech, the Minister confirmed that measures would be put in place in 2014 to deliver on this commitment. The maximum allowable pension fund that an individual may have at retirement has already been capped in recent Finance Acts and is now €2.3m (subject to a higher Personal Fund Threshold having been approved by Revenue in individual cases).
A summary of the key announcements enacted in the Finance Act 2013 were:
- As announced in the Minister’s Budget 2013 speech, Finance Act 2013 provides for an option for individuals to take a once off early withdrawal of up to 30% of their AVC funds (including contributions to an AVC PRSA). Early withdrawals from other pension products are not provided for. The Act has confirmed that withdrawals must be made during the period of 3 years commencing on the date of passing of Finance Act 2013.
- In the past individuals wishing to transfer pension funds to an ARF were also required to transfer some funds to Approved Minimum Retirement Fund (AMRF), unless they had annual guaranteed income from other sources of €12,700 per annum or more. Finance Act 2011 increased the limits of the annual guaranteed income value and the amount of the contribution to be made to an AMRF or used to purchase an annuity.The annual guaranteed income was increased to approximately €18,000 per annum and the amount to be transferred to an AMRF or applied to purchase an annuity was increased to the lessor of:
- the amount in the pension fund, following the taking of the lump sum; or
- approximately €120,000.The Finance Act 2011 subsequently increased this amount to €18,000 per annum. The Act withdraws the increased thresholds and reinstates the pre- Finance Act 2011 amounts. This alteration is intended to remain in place for a period of 3 Years.
- Marginal rate of income tax relief is to be retained on pension contributions. The current pension levy of 0.6% will not to be renewed after 2014 and tax relief on pension contributions to subsidise income up to €60,000 per year in retirement. The Standard Rate Fund Threshold of €2.3 million will continue for those retiring in 2013 and the maximum tax free cash lump sum is to remain at €200,000.
Further information on the Finance Act 2013 http://www.revenue.ie/en/practitioner/law/bills/finance-bill-2013/