The federal government has released two out of three tranches of exposure draft legislation for superannuation reforms that were announced in the 2016 federal budget.
In a joint statement, Treasurer Scott Morrison and Revenue and Financial Services Minister Kelly O’Dwyer said the reforms would make the super system fairer, more flexible and more sustainable, and the majority of Australians – 96 per cent of individuals with super – would either be better off or unaffected as a result of the changes.
The first tranche of draft legislation, released on 15 September, would enshrine the objective of super in legislation, being to provide income in retirement that substituted or supplemented the age pension, which had guided the development of the government’s reforms, Morrison and O’Dwyer said.
The draft legislation will also improve access to concessional contributions by allowing people under the age of 75 to claim a tax deduction for personal super contributions irrespective of their employment arrangements.
It will provide more flexibility and choice for older Australians by removing the restrictions that currently prevent some people aged between 65 and 74 from making voluntary contributions to their super.
Further, it will encourage more people to make contributions to the super fund of a low-income spouse and introduce the Low Income Superannuation Tax Offset.
On 28 September, the government released the second tranche of the exposure draft legislation containing legislative amendments to implement the government’s $1.6 million transfer balance cap, which places a limit on the amount an individual can hold in the tax-free retirement phase.
The draft legislation will make the taxation of concessional contributions (CC) in super more sustainable by lowering the CC cap to $25,000 a year and reducing the income threshold at which individuals are required to pay an additional 15 per cent contributions tax from $300,000 to $250,000, Morrison said.
It will also allow individuals with balances of less than $500,000 to carry forward unused concessional cap space for up to five years, as well as encourage the development of innovative retirement income products to provide more choice and flexibility for retirees.
Also included is the abolition of the outdated anti-detriment provision, which effectively results in a refund of a member’s lifetime super contributions tax payments into an estate, and it will also apply commensurate treatment for these measures to defined benefit schemes and constitutionally protected funds.
Finally, it will ensure transition-to-retirement income streams are accessed for the purpose for which they are designed and not for tax minimisation.
The exposure draft and explanatory material on the remaining measures, which will comprise the final third tranche, will follow shortly and the government remains on track to have the super measures introduced into parliament before the end of the year.
The SMSF Association welcomed many elements of the first tranche of draft legislation and said it believed it would give the system a much needed confidence boost, but it wanted adequacy to be addressed in the definition of super.