News 06/07

Super Concepts e-SuperUpdate provides you with technical tips and updates on Self Managed Superannuation Fund topics of interest.

Superannuation changes from 2007 Federal Budget

Last year we saw significant changes to the superannuation system, much of which is to commence from 1 July this year.  These changes included new streamlined and extended rules for contributions, tax free superannuation benefits paid to those who qualify and are 60 and older and abolition of compulsory drawdown rules.   

In this year’s Federal Budget we saw just a few minor changes to the superannuation system aimed mainly at low income earners.  The changes were:

• Extension of the CGT roll-over on marriage breakdown for self-managed and other small superannuation funds to allow one spouse in a marriage breakdown to transfer their entire benefit in specie to another fund without incurring a CGT liability.  Under the current rules only in specie transfers which are covered by a split made under the Family Law Act are excluded from CGT on transfer.  The Budget announcement extends the exemption to all assets transferred between small funds because of the marriage breakdown.
• A one off payment to those who were already eligible for the co-contribution of up to $1,500 for the 2005/06 financial year.  The one off payment will double the amount of the co-contribution paid to the person for that year.  For a person who was aged 20 and eligible for the full amount of co-contribution the additional contribution could provide approximately another $18,000 in superannuation by the time they retire.
• Retail superannuation funds will be restricted from requiring employers to sign participating employer agreements before they can make superannuation fund contributions for employees.  The removal of this restriction is welcomed as it locked employers in to agreements which obliged them to pay contributions under a formal agreement to a particular fund.  The change means that employers can now make contributions in accordance with the superannuation law and not under a restrictive agreement imposed by the particular fund.
• Voluntary, after tax contributions to the Commonwealth Super Scheme and Public Sector Scheme will be optional from 1 July 2008.  Also, members of either scheme will have access to the choice of fund legislation from that time.
• The Budget papers also made mention of the previously announced  transitional rules to allow non-deductible superannuation contributions until 30 June 2007 for those who were 64 or 74 and reached age 65 or 75 after 10 May 2007 and before 1 July 2007.  Mention was also made of the extension of the rules to treat death benefits paid to non-dependant children of members of the Defence Forces and Emergency services who are killed in the line of duty.

Please note that the proposed changes referred above require the passage of legislation through Parliament before becoming effective and the final form of these proposals may differ from as they are presented here

With just 7 weeks to go until 30th June 2007, time is running out if you wish to take advantage of strategies such as the $1million opportunity and crystallising your benefits to maximise your pre 1st July 1983 component.

In the next e-SuperUpdate we will be providing information on crystallising your pre 1st July 1983 component.