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.
As a result of the consultation process 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 2 years of contributions, enabling $450,000 to be contributed in one year, with no further contributions in the next 2 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 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 TFN 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.
Full details of the Government’s superannuation changes, including the Outcomes of Consultation report dated 5 September 2006, can be found here
For a copy of the Treasurer's press release, No 2006/093, 5 September 2006, go here