Superannuation simplification details announced

The Treasurer has announced the final details of the proposals outlined in A Plan to Simplify and Streamline Superannuation which was released as part of the 2006-07 Budget.   

The main proposal of the 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. 

Treasurer confirmed that the Government will proceed with these

Transition arrangements will
be put in place to make the transition to the new superannuation system
easier, improve administration and improve the integrity of the
superannuation system. Those 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 which will allow people who were planning a large contribution
    under the existing rules to do so;

    • 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;
  • the arrangements to administer the contribution caps will be streamlined;
  • there will be transitional arrangements for employer eligible
    termination payments 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 including: a Government funded education
    campaign; allowing people up until 30 June 2008 to quote their TFN
    before the withholding tax need apply; a refund of any tax withheld for
    a period of up to four years; allowing quotation of a TFN for
    employment purposes to be treated as being for superannuation purposes;
    removal of the $1,000 threshold for accounts commenced from 1 July
    2007; and the ATO using their systems to improve the quotation of TFNs;
  • the concessional amount of lump sum benefits from an untaxed source will be increased from $700,000 to $1 million; and
  • the regulation of self-managed superannuation funds (SMSFs) will be
    improved by increasing funding to the ATO for compliance activities,
    streamlining reporting requirements and other measures. The supervisory
    levy will be increased to $150 which will place SMSFs on a similar cost
    recovery basis as other superannuation funds.
Print Friendly, PDF & Email

Your Compliance Support Plan

We understand you need a cost-effective way to keep up to date with regulatory changes. Talk to us about our fixed price plans.