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On 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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