Simplified Superannuation - Final Decisions
Outcomes of Consultation
5 September 2006
On Budget night the Government released a consultation paper which outlined its plan to reform Australia’s superannuation system. The detailed outline of A Plan to Simplify and Streamline Superannuation described the changes and how the new system would operate.
This attachment announces the Government’s response to the consultation and consideration of the plan. The attachment uses similar headings to those used in the detailed outline and refers to the relevant page numbers of that document to facilitate cross referencing.
Outline of proposal
Under the proposals described in the detailed outline, from 1 July 2007:
- Superannuation benefits paid from a taxed source either as a lump sum or as an income stream such as a pension, would be tax free for people aged 60 and over.
- Benefits paid from an untaxed source (mainly affecting public servants) would still be taxed, although at a lower rate than they are now for people aged 60 and over.
- RBLs would be abolished.
- Individuals would have greater flexibility as to how and when to draw down their superannuation in retirement. There would be no forced payment of superannuation benefits.
- The concessional tax treatment of superannuation contributions and earnings would remain. Age-based restrictions limiting tax deductible superannuation contributions would be replaced with a streamlined set of rules.
- The self-employed would be able to claim a full deduction for their superannuation contributions as well as being eligible for the Government co-contribution for their post-tax contributions.
- The ability to make deductible superannuation contributions would be extended up to age 75.
- It would be easier for people to find and transfer their superannuation between funds.
To increase further the incentives to save for retirement, from 20 September 2007 the pension assets test taper rate would be halved to $1.50 per fortnight for every $1,000 of assets above the assets test free area.
The superannuation preservation age would not change. The preservation age is already legislated to increase from 55 to 60 between the years 2015 and 2025. People would still be able to access superannuation benefits before the age of 60, although they would continue to be taxed on their benefits under new simplified rules.
This attachment refers to the same terms as explained in the glossary to the detailed outline.