Superannuation - Stop Press

In the 9 May 2006 Federal Budget, the Treasurer announced significant changes to superannuation making it simpler and more tax effective. Following a period of consultation, the Government has released its final proposals. Draft legislation is not expected before November 2006 so further changes might still be forthcoming. Many of the recent announcements were clarifications, however a few notable changes include:

	Under transitional arrangements applying from 10 May 2006 to 30 June 2007, individuals will be able to make up to $1,000,000 in after-tax (undeducted) contributions to superannuation. (A work test will apply to those aged 65 and over). This change should be considered by anyone with substantial assets who is interested in transferring wealth into a more tax-effective superannuation environment.
	From 1 July 2007, the level of after-tax contributions will be restricted. Limits are expected to be set at $150,000 per financial year for those aged 65 and over who meet a work-test, and up to $450,000 over 3 years for under 65s. A future work-test will not be required for those aged 63 and 64 wanting to contribute up to $450,000.
	Superannuation benefits paid from a taxed fund to members as either a lump sum or pension will still be tax-free for anyone aged 60 and over. Members of untaxed funds aged 60 and over (mainly public servants) will pay 15% tax on the first $1,000,000 of untaxed benefits. The top marginal tax rate will apply to the balance of untaxed benefits. The original announcement proposed a $700,000 concessionally taxed limit.

These changes are far-reaching and can be complicated. A more extensive analysis of the changes is available in our superannuation update. We would be pleased to help you implement the most effective solution for your situation.

Published : 13 September 2006