NO.131

JOINT PRESS RELEASE

TREASURER &

MINISTER FOR REVENUE & ASSISTANT TREASURER

SIMPLIFIED SUPERANNUATION LEGISLATION INTRODUCED INTO PARLIAMENT

The Treasurer today introduced into Parliament the Tax Laws Amendment (Simplified Superannuation) Bill 2006 to implement the most significant reforms to the taxation of Australia’s superannuation system in its history. 

The reforms will sweep away the current raft of complex tax arrangements that apply to superannuation and cut the number of pages of superannuation law in the income tax assessment Acts by over a third.

The centrepiece of the Bill is that Australians aged 60 or over will be able to access their superannuation benefits tax free from 1 July 2007 if they are paid from a taxed superannuation fund.  Cutting taxes will increase retirement incomes, improve incentives to save and strengthen incentives for older Australians to remain in the workforce.

As a result of these reforms, in the vast majority of cases, the 90 per cent of Australians in taxed schemes will have the tax treatment of their superannuation benefit covered in one paragraph of law if they access their superannuation after age 60. 

This Bill delivers on the Government’s commitment to simplify and streamline superannuation.  The Government welcomes Labor’s belated support for the measures.

The Assistant Treasurer said that regulations supporting the Bill will be made after it receives Royal Assent.  Key draft regulations, such as the new pension rules, will be exposed earlier for public comment to the extent possible. 

The Treasurer noted that consequential amendments, including the formal repeal of the old law, will be included in another Bill to be introduced to Parliament in early 2007, allowing the Bills to be debated concurrently in the Autumn sittings of Parliament. 

The total cost of the reforms is $7.2 billion over the forward estimates. 

Change to unclaimed money arrangements

The Treasurer also announced an additional measure to improve the arrangements in respect to lost and unclaimed superannuation. 

Currently, superannuation funds have processes in place to notify the Australian Taxation Office (ATO) of superannuation accounts which are inactive or where the member is uncontactable.  Upon notification, the ATO adds this information to the Lost Members Register, which can be used by individuals to search for their lost superannuation accounts. 

When an individual reaches age 65 and cannot be contacted by their fund, their superannuation benefits become unclaimed money and are paid to the government of the State or Territory in which the superannuation fund is based.  These monies are held in trust by the relevant government until claimed by the rightful owner or their estate.  This results in a fragmented system for individuals searching for unclaimed superannuation, particularly if they have worked in numerous states or their fund was based in a different state to that in which they were employed.  These arrangements are not optimal for older Australians trying to find their superannuation.

The Australian Government is significantly enhancing the policy and administrative framework to ensure that individuals receive the full benefit from their superannuation savings.  The Government has provided a significant increase in resources for the ATO to reduce the amount of money held in lost accounts.  This includes rationalising existing processes to identify actual lost members; more comprehensive reporting from funds; an extensive letter campaign to lost members in 2007-08 and 2008-09; establishing a web based tool for locating lost accounts; and, by 2009-10, enabling members to electronically request consolidation of their accounts through the ATO website. 

The Australian Government will now take full responsibility for the management of unclaimed superannuation, which means that in future, unclaimed superannuation money will not be paid to the States or Territories.  This is consistent with the arrangements for lost superannuation and provides a single access point for individuals searching for lost or unclaimed superannuation and a simpler nationalised claims process going forward.  As a result, individuals will be able to seek advice directly from the ATO on any superannuation-related issue, without having to contact numerous government agencies.

These changes will not affect State and Territory government superannuation schemes.

The Australian Government is investing significant resources in these changes to assist more individuals to access all of their superannuation at retirement.

The Treasurer has written to all State and Territory Treasurers to inform them of the Australian Government’s proposal. 

Additional information

The Assistant Treasurer said that the Government will act to address any avoidance activities that are undertaken in the simplified superannuation system.  In particular, the Government will consider amendments to Part IVA of the Income Tax Assessment Act 1936 to ensure that superannuation-related avoidance is dealt with appropriately.  The Assistant Treasurer noted that the date of effect of any anti-avoidance measures would be backdated to the date of this announcement. 

The Assistant Treasurer also clarified the administrative arrangements for people who have made after-tax contributions above $1 million since 10 May 2006.  People will be able to withdraw (without penalty) excess after-tax contributions that have been made before today.  People in this situation will need to make an application to the Australian Taxation Office before 30 June 2007 to release the money.  People will also be able to seek the Commissioner of Taxation’s discretion to disregard or reallocate excess after-tax contributions made since 10 May 2006 to a different income year in limited special circumstances.   

CANBERRA

7 December 2006

Contact:

Renae Stoikos – 02 6277 7340

Attachment A

Simplified superannuation — impact on fiscal balance⁽¹⁾

(1) Figures may not sum to the total due to the effects of rounding and do not include the impact on the fiscal balance of the change to unclaimed money arrangements announced today.