Category: Investment

Simplifying super plan: Govt’s final decisions on transitional concessions

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.

ASIC concerned over misleading use of past performance information in ads

ASIC has cautioned investment funds against the misleading use of past performance information in advertising and promotional aterial.

Today’s warning follows concerns by ASIC that an advertisement for an investment product offered by BT Financial Group (BT) included past performance information which was potentially misleading. The advertisement’s headline asked the rhetorical question: ‘Past performance isn’t a reliable indicator of future performance, is it?’ followed by past performance information showing strong returns.

In ASIC’s view, the advertisement was misleading because it encouraged consumers to believe that the past performance of the product was a reliable indicator of future performance.

‘Past performance is not a reliable indicator of future performance. An undue emphasis on past returns can lead to consumers having unrealistic expectations and making poor investment decisions’, ASIC’s Executive Director of Consumer Protection, Mr Greg Tanzer said.

Mr Tanzer said ASIC was particularly concerned that the BT advertisement reflected a flippant approach to guidelines detailed in its Guide on the Use of Past Performance in Promotional Material.

‘ASIC expects that industry will take a responsible approach to its marketing activities. If you’re going to use past performance information in your advertising, you must do it responsibly and without being misleading’, he said.

BT has agreed to stop its existing advertising and refrain from using similar wording in future advertisements. BT is now also implementing measures to improve compliance in its advertising and other communications.

In 2003, ASIC commissioned a review of Australian, UK, and US academic studies into the correlation of past performance with future performance. The review concluded that good past performance is, at best, a weak and unreliable predictor of future good performance over the medium to long term.

From ASIC media release