The Government, on Wed 12.4.2017, released exposure draft legislation proposing technical amendments to resolve certain issues identified with the superannuation reform legislation. The proposed amendments relate to the transition to retirement income stream (TRIS) rules, CGT relief for TRISs, the $1.6m pension transfer balance cap, the concessional contributions cap and the objectives of superannuation. While the amendments are described as “minor and technical” some of the amendments are nonetheless important.
The amendments will deem a TRIS to be in retirement phase where the recipient of the income stream has satisfied a condition of release with a Nil cashing restriction (eg retirement or attaining age 65). This means that a TRIS will stop being a pension (subject to 15% tax on fund earnings from 1 July 2017), and become a retirement phase income stream that qualifies for the tax exemption from the time the TRIS recipient satisfies a Nil condition of release. As a result, a TRIS recipient will not need to commute their TRIS and replace it with an account-based pension to access the earnings tax exemption when the TRIS recipient later satisfies a Nil condition of release (eg retirement or attaining age 65).
SUBMISSIONS are due by 24 April 2017.
[Treasury Website – consultation page; draft Bill; LTN 70, 13/4/17]
Extract from the Explanatory Memorandum – Summary of new law
Transfer balance cap amendments
1.28 Schedule 1 makes a number of changes to the transfer balance cap provisions. These changes:
- enable additional transfer balance credits and transfer balance debits to be prescribed;
- clarify the matters covered by the assumption about compliance with pension or annuity rules and standards and for which the consequences of not complying with a commutation authority are disregarded;
- enable the correct value for a debit that arises for failures to comply with rules and standards to be calculated for a failure that occurs part-way through an income year;
- bring forward the application of the changes to the death benefit roll-over rules to facilitate individuals rebalancing their superannuation interests in anticipation of the transfer balance cap applying from 1 July 2017; and
- bring forward the application of the rules about the transfer of assets by life insurance companies to facilitate those companies accounting for and rebalancing their assets in anticipation of the transfer balance cap applying from 1 July 2017.
Concessional contributions cap amendments
1.29 Schedule 1 updates the Guide Material for the concessional contributions cap to ensure that it accurately describes the way that the unused concessional cap carry forward rules apply.
1.30 Minor amendments are also made to the IT(TP) Act 1997 and the Superannuation Guarantee (Administration) Act 1992 to ensure that references to the concessional contributions cap within those Acts continue to apply to the basic annual cap rather than a cap that is modified by the unused concessional cap carry forward rules.
Amendments in relation to the objectives of superannuation
1.31 Schedule 1 amends the Legislation Act 2003 to repeal the requirement to prepare a statement of compatibility with the Superannuation (Objective) Act 2016. The requirement to prepare a statement of compatibility is also reinserted with application that is contingent upon Bill being enacted. These amendments recognise that the Superannuation (Objective) Act 2016 was not enacted in 2016.
Amendments in relation to TRISs
1.32 The amendments in relation to the TRIS rules relax the existing prohibition on TRISs ever being in the retirement phase. As a result, a TRIS will now be in the retirement phase if the member has satisfied a condition of release with a nil cashing restriction.
1.33 The amendments also modify section 294-110 of the IT(TP) Act 1997 to ensure that a fund can apply CGT relief in respect of assets that cease to be segregated current pension assets when the broader TRIS changes come into effect.