On 27.9.16, the Government released 2 Draft Bills and a draft regulation and explanatory material comprising the 2nd tranche of superannuation reforms that were first announced in the 2016-17 Budget:

  • Exposure Draft: Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016
  • Exposure Draft: Superannuation (Excess Transfer Balance Tax) Imposition Bill 2016
  • Exposure Draft: Treasury Laws Amendment (Fair and Sustainable Superannuation) Regulation 2016

The Government said this tranche of Drafts includes legislative amendments to:

  1. implement the Government’s $1.6m transfer balance cap, which places a limit on the amount an individual can hold in the tax-free retirement phase;
  2. lower the concessional contributions cap to $25,000 per year and reduce the income threshold at which individuals are required to pay an additional 15% contributions tax, from $300,000 to $250,000;
  3. allow individuals with balances of less than $500,000 to “carry forward” unused concessional cap space for up to 5 years;
  4. encourage the development of innovative retirement income products to provide more choice and flexibility for retirees;
  5. ensure that transition to retirement income streams are accessed for the purpose for which they were designed and not for tax minimisation;
  6. abolish the out-dated anti-detriment provisions, which effectively result in a refund of a member’s lifetime superannuation contributions tax payments into an estate; and
  7. apply commensurate treatment for these measures to defined benefit schemes and constitutionally protected funds.

The Government said the release of draft legislation and explanatory material on the remaining measures will “follow in coming weeks”. The Government added that it remains on track to have these measures introduced in Parliament “before the end of the year”.

[LTN 187, 27/9/16]

F&SS Bill – Schedule 1 – Transfer Balance Cap

294-1 What this Division is about

There is a cap on the total amount you can transfer into the retirement phase of superannuation (where earnings are exempt from taxation).

Credits are added to a transfer balance account when you transfer amounts.

If the balance in your account exceeds the cap, you will be required to remove the excess from the retirement phase, and you will be liable to pay excess transfer balance tax.

F&SS Bill – Schedule 2 – Part 1: Reducing concessional contributions cap to $25k indexed

Item 1 – Subsection 291-20(2)

Repeal the subsection, substitute:

(2) Your concessional contributions cap is:

(a)     for the 2017-2018 financial year—$25,000; or

(b)     for the 2018-2019 financial year or a later financial year—the amount worked out by indexing annually the amount mentioned in paragraph (a).

F&SS Bill – Schedule 2 – Part 2: Reduce Div 293 tax threshold to $250k

Part 2—Division 293 tax

Income Tax Assessment Act 1997

  1. Section 293-1

Omit “very high income”, substitute “high income”.

  1. Section 293-1

Omit “$300,000”, substitute “$250,000”.

  1. Sections 293-5 and 293-10

Omit “very high income”, substitute “high income”.

  1. Section 293-10

Omit “$300,000”, substitute “$250,000”.

  1. Subsections 293-20(1), 293-155(1) and 293-200(1)

Omit “$300,000”, substitute “$250,000”.

F&SS Bill – Schedule 6 – Part 2: Reduce Div 293 tax threshold to $250k

Part 2—Division 293 tax

Income Tax Assessment Act 1997

  1. Section 291-1

After:

There is a cap on the amount of superannuation contributions that may receive concessional tax treatment for an individual in a financial year.

insert:

You can carry forward unused concessional contributions cap from the previous 5 financial years and use it to increase your cap in a later financial year (unless your total superannuation balance exceeds $500,000).