Superannuation Simplification

A brief outline, of the proposed changes for 1 July 2007, is set out below:

Individuals

• No tax paid on superannuation benefits paid from age 60
• Tax would still be made payable on benefits paid to someone aged below 60, although the rules are simplified.
• Reasonable Benefit Limits will be abolished
• The rules which force a person to take their super after age 60 will be removed. No longer a need to meet a work test in order to meet their benefits.
• People can choose to take their benefit as either an income stream or a lump sum.
• Age-based limits will be abolished and replaced with a flat $50,000 p.a. contribution limit (with a transitional period for people aged over 50).
• Post-tax contributions would be capped at $150,000 a year (3 times the pre-tax annual contributions level). The government will consider whether the cap should be averaged over 3 years to allow people to accommodate larger one-off payments.

Employers

• Employers will have the ability to make deductible superannuation contributions for employees up to age 75.
• The self-employed will receive full deductibility for their contributions consistent with contributions made on behalf of employees.

A special transitional arrangement, will allow individuals and business owners the opportunity to contribute up to $1 million in after-tax contributions to superannuation by 30 June 2007. Typically, these contributions will generally include the sale of property and shares.

These changes come as an encouragement to use super to save for retirement and provide incentives for older Australians to stay in the workforce. It is also important to note that significant penalties apply to excess contributions. In some cases contributions can be taxed up to 93%, therefore it is important that caps are not exceeded.

If you would like more information on these superannuation changes, please contact our office on (02) 9438 3233 or email info@alexanders.net.au.