Simplified Superannuation update
Update: 30 April 2007
New super tax legislation that affects all superannuation funds and their members comes into effect from
1 July 2007.
A summary of changes is outlined below. We will be sending you more detailed information on these changes in early June.
Tax File Numbers
If we don’t have your Tax File Number (TFN), this could have a significant impact on your superannuation benefits.
Although it is not compulsory for you to provide us with your TFN, you should be aware of the consequences of not doing so.
From 1 July 2007, if we do not have your TFN:
- we will not be able to accept your after-tax member contributions; and
- your employer and any salary sacrifice contributions will be taxed at the top marginal tax rate, plus the Medicare Levy (46.5%).
If we have your TFN on record it will be shown on your most recent Member Statement. To provide your TFN you can:
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Changes to contributions:
From 1 July 2007, there will be caps on the amount of contributions you can make without incurring
additional tax.
Contributions will be classed as concessional contributions or non-concessional contributions.
Non-concessional contributions
These are your personal contributions made into the PSSap from your after-tax salary.
There will be a cap on non-concessional contributions across all your superannuation funds.
The caps on non-concessional contributions are:
- $150,000 per year; or
- for members under 65, $450,000 over three years. For example, $300,000 in year one, $100,000 in year two and $50,000 in year three.
Concessional contributions
These are contributions from pre-tax income. This includes the contributions made by your employer into the PSSap at the rate of 15.4% of your super salary. Any salary sacrifice contributions made into the PSSap will also be included in the concessional contributions cap.
There will be a cap on concessional contributions across all your superannuation funds.
The caps on concessional contributions are:
- $50,000 per year; or
- for members over 50, a transitional limit of $100,000 per year for five years
(financial years 2007/08 to 2011/12).
Contributions above this cap will be taxed at the top marginal tax rate and will also count towards the
non-concessional contributions cap.
Some changes to taxation of benefits
If you are aged 60 or over and you take any part of your benefit as a lump sum or pension, it will be tax-free. Please note that the PSSap does not offer a pension product yet.
There will be further changes to the taxation of benefits for members under age 60.
Other changes or considerations
- Reasonable Benefit Limits have been abolished.
- If you are between the ages of 65 and 74 and you are still employed, you will need to meet the work test to show you are eligible to contribute.
- The age pension assets taper test rate has changed. For further information visit www.centrelink.gov.au
- Any part of your benefit which is taxed will also be subject to the Medicare levy.
- Senior Australian tax offset may apply to you. For further information visit www.ato.gov.au
Further information regarding the tax changes can be found at www.simplersuper.treasury.gov.au
If you are planning of making any changes to your superannuation arrangements, we recommend that you seek financial advice before making any decisions.
Update: 25 September 2006
The Government announced significant proposals to simplify and streamline the taxation of superannuation benefits as part of the Budget in May 2006. The Government consulted on the proposals until 9 August and on the 5 September, announced the outcomes of this process. It now expected that legislation brought forward by Christmas for implementation by 1 July 2007.
In summary, these proposals improve the already attractive taxation provisions for Superannuation. The main proposed changes include:
- the abolition of tax paid on lump sums and pensions received from a taxed superannuation fund for those over the age of 60
- the abolition of Reasonable Benefit Limits
- conversion of the pre 1983 component (as at 30 June 2007) into an exempt (from tax) component
- maximum $50,000 deducted contribution limit (i.e. employer and salary sacrifice amounts). A further transitional limit of $100,000 for five years for individuals aver 50 years of age
- maximum $150,000 undeducted contribution limit (i.e. after tax contributions) per year or $450,000 over three years for individuals less than 65 years old
- greater flexibility in choosing when and how much to draw down. There will no longer be forced payments of benefits (i.e. transfer from accumulation to pension phase)
- deductible contributions can still be made up to 75 years of age
- the existing maximum and minimum factors for allocated pensions will be changed to require only minimum percentage to be drawn down each year (i.e. 4% for those aged 60-64). There will be no maximum, except in the transition to retirement phased where a maximum of 10% per year will apply.
The limits above are to be indexed to Average Weekly Ordinary Time Earnings (AWOTE) rounded over time and, to keep it simple, this will be done in $5,000 increments.
Further information regarding the proposed tax changes can be found at www.simplersuper.treasury.gov.au
If you require any further information in relation to the proposed changes announced by the Treasurer and how they may impact on the withdrawal of your benefits, we recommend that you seek professional financial planning advice.
Update: 8 August 2006
The Government has announced significant planned changes to the taxation of superannuation benefits received from a taxed superannuation fund, such as the PSSap. The changes will take effect from 1 July 2007 and apply to members over the age of 60.
Among the Government's proposed changes are:
- The abolition of Reasonable Benefit Limits;
and
- The abolition of tax paid on lump sums and pensions received from a taxed superannuation fund.
In addition, the Government also announced planned changes to the way in which you may draw down your superannuation pension, which are also to apply from 1 July 2007.
All these measures are yet to be passed as law. These changes are proposals ONLY at this stage, and the Government is currently seeking submissions and comments on the changes.
If you require any further information in relation to the proposed changes announced by the Treasurer and how they may impact on the withdrawal of your benefits, we recommend that you seek professional financial planning advice.
Further information regarding the proposed tax changes can be found at www.simplersuper.gov.au
ARIA has made a submission to the Department of Treasury regarding the proposed changes. A copy of the submission can be found here.
Update:10 May 2006
The Federal Budget 2006 announced on 9 May 2006 proposed significant changes to simplify and streamline superannuation in Australia .
The Government's plan proposes to:
- Simplify superannuation arrangements for retirees, making it easier to understand
- Improve incentives to work and save; and
- Introduce greater flexibility in how superannuation savings can be drawn down in retirement.
The Government is seeking comment from the community. A copy of the paper which outlines the changes can be found here .
If the proposed changes are implemented, we will need to assess the impact on the PSSap.
We will advise members via this website once that assessment is made.
