Simpler Super
By Michael Blake
Bentleys MRI Melbourne
The Federal Government has recently passed a new “Simpler Super” package.
Usually when the Federal Government introduces legislation using the description “Simpler”, alarm bells ring as these changes far from simplify the process. In this instance, however, the changes to the superannuation system do offer real benefits and opportunities to working Australians.
The centrepiece of the package is the abolition of superannuation “exit taxes” from 1 July 2007 for retirees reaching 60 years of age whether they take a pension or a lump sum.
Abolition of exit taxes will bring greater incentives for people to contribute to super - particularly people under 50 years of age who traditionally have not planned far in advance for retirement. Salary sacrificing super as part of a remuneration package is likely to become more common in the workplace among younger employees and can offer significant long term benefits.
New contribution limits will apply from 1 July 2007 and these limits will be indexed annually, and contributions in excess of these limits will subject to “excess contributions tax”.
In conjunction with the new contribution limits the Federal Government has allowed some concessions for superannuants to transition into the new system from 1 July 2007 primarily in relation to non-concessional/undeducted contributions.
When making a non-concessional/undeducted contribution before 1 July 2007, you should consider the following:
· Don’t neglect the salary sacrificing opportunities in the current tax year to 30 June 2007
· Whether as a self-employed person you may be able to “double dip” an employer and a self employed deductible contribution before 30 June 2007
· If you are over 50, there will be five years in which to make concessional/deductible contributions of $100,000 p.a. from 1 July 2007
· If you choose to contribute an asset to your self-managed superannuation fund with a market value of $1 million or less, have you considered whether the asset is permitted to be contributed to the fund e.g. listed shares, commercial property? (Remember this contribution is non-deductible!)
· If you contribute an asset to your fund, particularly commercial property, have you considered the impact of capital gains tax, stamp duty and GST?
· Can you afford to lock up cash or an asset in the fund until retirement? Does the asset produce an income stream upon which you depend to meet ongoing financial commitments?
Other planning considerations before 1 July 2007 centre on maximising the opportunity for giving tax-free superannuation money to adult children on your death.