In a surprise announcement [5.9.2006], the Treasurer and Assistant Treasurer confirmed that the Government will proceed with its superannuation simplification proposals, which include the removal of end benefits tax for those over age 60 from 1 July 2007 and the abolition of RBLs and age-based contribution limits.
The Government also announced its ‘final decisions’ on further transitional concessions (some of which are very generous) for its 2006/07 Budget superannuation simplification plan. In particular, Mr Costello announced the following transitional arrangements, which will be put in place to make the transition to the new superannuation system easier:
- Undeducted contributions — people will be able to make up to $1m of post-tax undeducted contributions between 10 May 2006 and 30 June 2007. The $150,000 annual limit on post-tax contributions will now commence from 1 July 2007 (instead of 10 May 2006). People aged less than 65 will be able to bring forward two years of contributions, enabling $450,000 to be contributed in one year. In addition to the annual $150,000 cap, people will be able to contribute a lifetime limit of $1 million from the sale of small business assets held for 15 years and settlements for injuries resulting from permanent disablement;
- indexation of contribution limits — administration of contribution caps will be streamlined and indexed to AWOTE in $5,000 increments;
- employer ETPs — transitional arrangements until 1 July 2012 for employer ETPs specified in existing employment contracts as at 9 May 2006;
- employee invalidity benefits — concessional tax treatment will be extended to the self-employed;
- TFNs — quotation of a TFN for employment purposes to be treated as being for superannuation purposes; people allowed until 30 June 2008 to quote their TFN before withholding tax will apply; a refund of any tax withheld for a period of up to four years; and removal of the $1,000 threshold for accounts commenced from 1 July 2007;
- untaxed superannuation schemes — the concessional amount of lump sum benefits from an untaxed source will be increased from $700,000 to $1 million; and
- SMSFs supervisory levy — to be increased to $150 (up from $45).
The Treasurer also said the Government will not be proceeding with the numerous other issues raised in the consultation process.
According to the Government, those submissions would have imposed a significantly higher cost to revenue and added complexity. Legislation to implement the measures is expected to be introduced into Parliament before the end of 2006.
The full text of the Treasurer and Assistant Treasurer, joint press release No 093, 5 September 2006 can be found on the Treasurer’s website.