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5 September 2006, the Federal Government
released the final version of its Simpler Super proposals.
After a wide-ranging community consultation process, Treasurer
Costello has confirmed that the Government will proceed with
most of its original reforms but some transitional arrangements
will be put in place to make the the new superannuation system
fairer for pre-retirees, easier to administer and improve
its overall integrity.
The main objective of the original plan
was to remove benefits tax from 1 July 2007 for Australians
aged 60 and over who have already paid tax on their superannuation
contributions and earnings. Other key changes proposed in
the plan were:
- the abolition of reasonable benefit
limits and age-based contribution limits;
- greater flexibility for individuals
as to how and when they wish to draw on their superannuation
in retirement;
- allowing the self-employed to claim
a full deduction for their superannuation contributions
and be eligible for the Government co-contribution for their
personal post-tax contributions; and
- halving the current pension taper
rate to $1.50 from 20 September 2007.
The following additional measures have
been introduced to iron out some inequities for pre-retirees,
particularly those who were planning to make large super contributions
prior to retirement.
The new arrangements are as follows.
- Subject to any applicable work test,
people will be able to make up to $1 million of post-tax
contributions between 10 May 2006 and 30 June 2007.
- The $150,000 annual limit on post-tax
contributions will commence from 1 July 2007.
- People aged less than 65 will be able
to bring forward two years of contributions, enabling $450,000
to be contributed in one year, with no further contributions
in the next two years.
- In addition to the annual cap, people
can contribute a lifetime limit of $1 million from the sale
of small business assets which have been held for 15 years,
and settlements for injuries resulting in permanent disablement.
- Indexation of the contribution caps
to Average Weekly Ordinary Time Earnings in increments of
$5,000 to make it easier for people to understand how much
they can contribute to superannuation.
- Administration of the contribution
caps will be streamlined.
- There will be transitional arrangements
for employer ETPs which were specified in existing employment
contracts as at 9 May 2006 and are paid before 1 July 2012.
- The concessional tax treatment of the
employee invalidity benefits will be extended to the self-employed.
- New arrangements to encourage people
to quote their tax file number to their superannuation fund.
- The concessional amount of lump sum
benefits from an untaxed source will be increased from $700,000
to $1 million.
- The supervisory levy for self managed
super funds will be increased from $45 to $150 which will
place SMSFs on a similar cost recovery basis to other superannuation
funds.
Full details of the Government’s
superannuation changes can be found at http://www.simplersuper.treasury.gov.au.
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