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A super surprise or is it?

Publication date: 09 May 06 | Source: THE TAX INSTITUTE

"The surprise announcement to simplify aspects of Australia’s complex superannuation system is at first glance the most radical tax reform proposal in the 2006-07 budget" noted Andrew Mills, President of the Taxation Institute of Australia.  

"The Government’s changes announced tonight are breathtaking steps in the right direction of simplifying and streamlining the superannuation rules" he said.   "Australians aged 60 years and over, the self employed and pensioners can celebrate and look forward to a more financially secure retirement"

"Unfortunately, there are some obvious losers" he warned. "Persons aged 50 to 69 years will have their concessionally taxed contributions drastically reduced from $100,587 to $50,000 and any contributions made beyond the $50,000 limit will be hit with the top marginal tax rate."

"This may mean that super funds will have to cope with more red tape around tracking member contributions and potentially paying two different rates of tax".

"If the Government is serious about red tape reduction for funds a good first step would be for it to reverse its decision to require continued lodgment of superannuation surcharge returns, (despite repealing the surcharge)."

Mr Mills also urged "..the Government to ensure that the consultation process was undertaken without delay and the opportunity for simplification was not lost.  This radical reform is required to reduce compliance costs and the complexity of the superannuation tax regime.  These measures, if implemented properly, represent a major step forward" he concluded.