On 30 June 2006, following amendments to the SIS regulations*, the abolition of compulsory cashing of superannuation benefits was made law. This is the first 2006 Federal Budget superannuation proposal to be made law.
Originally, it was proposed to abolish compulsory cashing from 1 July 2007. A press release from the Treasurer on 13 June 2006 advised that the compulsory cashing rule would be brought forward to 10 May 2006.
Old compulsory cashing rules
Prior to the Budget announcements, a member’s superannuation benefits had to be cashed “as soon as practicable” after the occurrence of any of the following events:
1. the member attained age 65 but not age 75 and was not gainfully employed for at least 240 hours in the previous financial year; or
2. the member reached age 75 on 30 June 2004 and was not gainfully employed for at least 30 hours per week; or
3. the member reached age 75 on or after 1 July 2004; or
4. the member’s death.
New compulsory cashing rules
Compulsory cashing still applies if the member dies. The amendments only apply to cashing events 1, 2 and 3 above.
The amendments confirm that:
1. During the period 10 May 2006 to 30 June 2007 a member’s benefits in a regulated superannuation fund are not required to be cashed.
2. During the period 10 May 2006 to 30 June 2006 if a trustee cashed a member’s benefits under the old cashing rules, it is not a breach of the new compulsory cashing rules.
The wording of the amendments does not cover the period after 30 June 2007. It is assumed that the regulations will be amended in full prior to 30 June 2007 to address the ongoing abolition of compulsory cashing.