Australian Government, A Plan to Simplify Superannuation

Simplified Superannuation - Final Decisions

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Making it easier to find and transfer superannuation

Key Points

  • A new standardised form will be introduced to facilitate the transfer of benefits between funds. The maximum time period in which this transfer must occur will be reduced from 90 days to 30 days.
  • The ATO will be more proactive in supporting the consolidation of lost member accounts.

New arrangements (page 52)

Portability

Currently superannuation funds must transfer a benefit as soon as practicable after a request is received, and in any event within 90 days. The maximum time limit will be reduced from 90 days to 30 days. The 30 day period will commence after a person has provided all necessary information. Trustees will be required to follow up incomplete requests for transfers promptly.

All funds will be required to accept a standard form for portability requests. The form will include standard proof of identity requirements to ensure uniformity amongst funds. The standard form will make it easier for most members to provide the necessary information. The Government will consult on the development of this form.

Lost Members Register

The Government considers that there is scope to improve further the operation and effectiveness of the current lost member arrangements. The ATO will be given a more active role in facilitating the consolidation of lost accounts.

A phased approach will be put in place to reduce the number of people who are on the lost members register. This will include:

  • rationalising existing processes to identify actual lost members including redefining lost members to exclude inactive accounts and more comprehensive reporting from funds;
  • allow accounts of less than $200 to be paid tax free;
  • an extensive letter campaign to lost members in 2007-08 and 2008-09 with lost account reviews to be conducted over a four year period through a combination of outbound phone calls and letters;
  • establishing a web-based tool through which members can locate their lost accounts using their TFN and generate a pre-populated portability form; and
  • by 2009-10, members will be able to electronically request consolidation of their accounts through the ATO website.

Regulation of self-managed superannuation funds

Key Points

  • Additional resources will be provided to the ATO to better regulate self-managed superannuation funds.
  • Streamlined reporting requirements with new administrative penalties for late returns and false statements.
  • An increase in the supervisory levy from $45 to $150 per annum. This compares to the levy for small funds regulated by APRA of $500 per annum.

Improving the compliance of SMSFs

The growth of SMSFs has been increasing significantly over the past decade. The plan will make significant changes to the superannuation system. In particular, the removal of tax on end benefits will mean the restrictions on making contributions into superannuation will become critical to avoid abuse of the concessions given to superannuation. SMSFs currently account for approximately 50 per cent of contributions that are above the proposed contribution caps.

The Government is also concerned at the level of compliance by SMSFs with superannuation law and the level of trustee education and understanding of their responsibilities.

The Government will increase funding to the ATO to regulate SMSFs by $112 million over the forward estimates period. A range of changes are being made to ensure that SMSFs comply with their legislative obligations.

These changes will enhance compliance through increased ATO compliance activity, an increased focus on improving trustee awareness of their responsibilities, clearer auditor obligations and administrative penalties for late returns and false statements.

Changes to regulation of SMSFs

A single annual return will be introduced with the supervisory levy collected as part of the fund’s income tax assessment. The form will consist of the annual regulatory return, the income tax return, and the member contribution statement. This will make managing an SMSF simpler and is estimated to save SMSFs approximately $80 per annum in compliance costs.

The ATO will also improve and strengthen the education and assistance available to help trustees of SMSFs through the use of information products, standard forms and other tools.

The reporting obligations for auditors will also be clarified to ensure independent auditors are properly informed of what they are required to report to the ATO.

In order to ensure lodgement of returns, and the accuracy of information reported to the ATO, new administrative penalties will be introduced for failure to lodge returns and for false or misleading statements to provide the ATO with greater flexibility in administering the law.

Fringe benefits tax will be removed from in specie employer contributions to superannuation funds. Contributions paid as money are not subject to fringe benefits tax and it is an anomaly that in specie contributions are currently treated differently.

Supervisory levy

The Government has previously agreed that regulation of SMSFs should be broadly on a cost recovery basis. The current $45 levy has not changed since 1999 (when it was $200) and no longer adequately covers the reasonable costs of the ATO in regulating these funds. This compares to the levy for small funds regulated by APRA of $500 per annum.

From the 2007-08 financial year, the supervisory levy will be increased to $150 with the levy to be reviewed on a regular basis. The increase in the levy will enable the ATO to regulate this rapidly growing and diverse sector more effectively.

Fringe benefits tax will be removed from in specie employer contributions to superannuation funds.

Impact on fiscal balance ($b)

 

2006-07

2007-08

2008-09

2009-10

Total*

Cost at 2006-07 Budget (excludes admin)

 

-1.6

-2.3

-2.3

-6.2

Parameter changes since 2006-07 Budget

 

-0.3

0.3

0.0

-0.1

Policy changes since 2006-07 Budget

-0.1

-0.1

-0.1

-0.1

-0.4

Administration costs

-0.1

-0.2

-0.1

-0.1

-0.5

Total cost of superannuation changes

-0.1

-2.2

-2.3

-2.6

-7.2

Less Provision made in 2006-07 Budget

 

-1.6

-2.3

-2.3

-6.2

Net budgetary impact of changes

-0.1

-0.6

0.0

-0.3

-1.0

* Figures may not sum to the total due to the effects of rounding

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