23 Oct 12 MYEFO super changes announced, including deceased pensioner "fix"
In media release No 2012/069, issued 22 October 2012, the Minister for Financial Services and Superannuation and Minister for Employment and Workplace Relations, Bill Shorten, announced a number of changes and initiatives following the release of the Mid-Year Economic and Fiscal Outlook 2012-13 (MYEFO), including:
- Changes for lost superannuation
- Bringing the super industry online
- Membership of the SuperStream Advisory Council
- Reduction in superannuation industry levy from APRA regulated superannuation funds
- Increases to the SMSF levy
- Tax certainty for deceased estates of persons to whom pensions were being paid, and
- Greater certainty for superannuation fund mergers
In relation to lost superannuation, the Government will introduce the following reforms:
- The account balance threshold below which inactive accounts, and accounts of uncontactable members, are required to be transferred to the ATO will be increased from $200 to $2,000, to ensure they are properly protected from being eroded by fees and charges;
- Interest will be paid at a rate equivalent to Consumer Price Index (CPI) inflation from 1 July 2013 on all lost superannuation accounts reclaimed from the ATO;
- The period of inactivity before an account of an unidentifiable member is required to be transferred to the ATO will be reduced from five years to 12 months; and
- The reforms to the transfer of lost accounts to the ATO will take effect from 31 December 2012.
In relation to the SMSF levy:
- The levy will be increased from $191 to $259 per annum from 2013-14 onwards to ensure SMSFs pay the full cost of regulating their sector;
- The Government will also change the collection of the SMSF levy, so that it is paid in the relevant financial year, rather than the following financial year. This will ensure consistency with APRA regulated funds, which pay the Superannuation Supervisory Levy in the same financial year it is levied.
- The change in the timing of the collection of the SMSF levy will be phased in over the two years 2013-14 and 2014-15 to give SMSFs time to adjust.
In relation to the deceased estates of persons to whom pensions were being paid, the media release states as follows:
"Investment earnings derived by superannuation funds on assets supporting pensions are exempt from tax. A draft ruling [TR 2011/D3] issued last year by the ATO has led to some uncertainty over eligibility for this tax exemption following the death of the member to whom the pension was being paid.
Concerns have been raised with the Government that applying tax to investment earnings (including realised capital gains) following the death of a pension member poses practical difficulties for funds and risks eroding the value of death benefit payments to beneficiaries.
To address these concerns, the Government will amend the law to allow the pension earnings tax exemption to continue following the death of a pension recipient until the deceased member's benefits have been paid out of the fund.
This will benefit the beneficiaries of deceased estates by allowing superannuation fund trustees to dispose of pension assets on a tax-free basis to fund the payment of death benefits. It will also avoid the need for funds to rework tax calculations following the death of members in the pension phase.
The superannuation law requires the benefits of a deceased member to be paid out of the fund as soon as practicable.
These changes will apply to the 2012-13 and later income years."