Simplified Superannuation update

Update: 30 April 2007

New super tax legislation that affects all superannuation funds and their members comes into effect from 1 July 2007.

A summary of changes is outlined below. We will be sending you more detailed information on these changes in early June.

More Information

Tax File Numbers

New rules affecting members who have not provided the CSS with their Tax File Number (TFN) will apply.

From 1 July 2007, if we do not have your TFN:

we will not be able to accept your member contributions
your employer will not have to make productivity contributions on your behalf
the on-going value of your employer benefit may be affected
you will be taxed at the top marginal tax rate at the end of the financial year on any productivity contributions made by your employer; and
you may pay a higher rate of tax when you withdraw your benefit.

If we have your TFN on record it will be shown on your most recent Member Statement. To provide your TFN you can:

1. Ask your employer to send it to us
2. Complete the provision of TFN form - click here to download form.

Changes to contributions:

From 1 July 2007, there will be caps on the amount of contributions you can make without incurring
additional tax.

Your member contributions will be classed as 'non-concessional' and your employer productivity contributions will be classed as 'concessional'.

Non-concessional contributions

These are your personal contributions made into the CSS from your after-tax salary.

From 1 July 2007, there will be a cap on non-concessional contributions across all your superannuation funds.

The caps on non-concessional contributions are:

$150,000 per year; or
for members under 65, $450,000 over three years. For example, $300,000 in year one, $100,000 in year two and $50,000 in year three.

Note: CSS contributing members must pay a minimum of 5% of salary each fortnight.

Concessional contributions

These are contributions from your employer or your before-tax income. This includes the productivity contributions made by your employer into the CSS.

Although you are unable to salary sacrifice into the CSS, any salary sacrifice contributions made into other superannuation funds will also be classed as concessional contributions.

There will be a cap on concessional contributions across all your superannuation funds.

The caps on concessional contributions are:

$50,000 per year; or
for members over 50, a transitional limit of $100,000 per year for five years
(financial years 2007/08 to 2011/12).

Contributions above this cap will be taxed at the top marginal tax rate and will also count towards the
non-concessional contributions cap.

Some changes to taxation of benefits

Benefits will be taxed based on whether they are from a taxed source where the amount has previously been subject to tax, or from an untaxed source where tax has not been paid.

Benefits payable from a taxed source

These include your member contributions, post-1990 productivity, accumulated fund earnings and transfers from other superannuation funds.

If you are aged 60 or over and you take any part of your taxed benefit as a lump sum or non-indexed pension,
it will be tax-free

Benefits payable from an untaxed source

These include your employer component and pre-1990 productivity.

If you are aged 60 or over and you take any part of your untaxed benefit as a lump sum, the taxable component will be taxed at 15% up to a threshold of one million dollars and the top marginal tax rate above this amount. Whereas, if you take any part of your untaxed benefit as a pension, this will be taxed at your marginal tax rate less a 10% tax offset.

Other changes or considerations

Reasonable Benefit Limits have been abolished.
If you are between the ages of 65 and 74 and you are still employed, you will need to meet the work test to show you are eligible to contribute.
The age pension assets taper test rate has changed. For further information visit www.centrelink.gov.au
Any part of your benefit which is taxed will also be subject to the Medicare levy.
Senior Australian tax offset may apply to you. For further information visit www.ato.gov.au

Further information regarding the tax changes can be found at www.simplersuper.treasury.gov.au

If you are planning of making any changes to your superannuation arrangements, we recommend that you seek financial advice before making any decisions.

Update: 25 September 2006

The Government announced significant proposals to simplify and streamline the taxation of superannuation benefits as part of the Budget in May 2006. The Government consulted on the proposals until 9 August and on the 5 September, announced the outcomes of this process. It now expected that legislation brought forward by Christmas for implementation by 1 July 2007.

In summary, these proposals improve the already attractive taxation provisions for Superannuation.

The proposals differentiate benefits based on whether tax has or has not been paid on contributions. Your benefit includes both taxed and untaxed components. Generally your contributions, the funded employer productivity component and fund earnings, have already been subject to tax and therefore come from a taxed source.

For these "Taxed Components" the main proposed changes include:

the abolition of tax paid on lump sums and pensions received for those over the age of 60
the abolition of Reasonable Benefit Limits
conversion of the pre 1983 component (as at 30 June 2007) into an exempt (from tax) component;
maximum $50,000 deducted contribution limit (i.e. funded productivity). A further transitional limit of $100,000 for five years for individuals aver 50 years of age
maximum $150,000 undeducted contribution limit (i.e. after tax member contributions) per year or $450,000 over three years for individuals less than 65 years old.

The balance of your benefit (i.e. the unfunded employer component) comes from an untaxed source. For these "Untaxed Components" , the plan proposes for individuals 60 years or older:

for pensions reducing the tax payable from the individuals marginal tax rate to the individual marginal tax rate less a 10% tax offset,
for lump sums 15% tax up to a $1 million limit (originally proposed at $700,000) and the top marginal tax rate thereafter.

All the limits above are to be indexed to Average Weekly Ordinary Time Earnings (AWOTE) rounded over time and to keep it simple this will be done in $5,000 increments.

Further information regarding the proposed tax changes can be found at www.simplersuper.treasury.gov.au

If you require any further information in relation to the proposed changes announced by the Treasurer and how they may impact on the withdrawal of your benefits, we recommend that you seek professional financial planning advice.

Update: 8 August 2006

The Government is proposing a plan to simplify and streamline the current tax arrangements that apply to superannuation benefits.

The plan includes the following proposals that may reduce the tax payable on your benefit:

abolishing the tax paid on superannuation pensions and lump sums paid from a taxed fund for members aged 60 or over
reducing the tax payable on superannuation pensions paid from an untaxed fund for pensioners aged 60 or over by providing a 10% tax offset, and
simplifying the taxation arrangements for lump sums paid from an untaxed fund and for lump sums paid from a taxed fund for members under age 60.

Your CSS benefit includes both taxed and untaxed components. Your contributions, the funded employer productivity component and fund earnings have already been subject to tax and therefore come from a taxed source.

The balance of your benefit (ie the unfunded employer component) comes from an untaxed source.

These proposals, if implemented, might reduce the tax on your CSS benefit. The changes (including the implementation date of 1 July 2007) are, however, proposals ONLY at this stage and the Government is currently seeking submissions and comments on the changes.

If these proposals result in changes to the tax payable on CSS benefits from 1 July 2007, we will provide you with information via this website.

Further information regarding the proposed tax changes can be found at www.simplersuper.treasury.gov.au

ARIA has made a submission to the Department of Treasury regarding the proposed changes. A copy of the submission can be found here.

Update: 10 May 2006

The Federal Budget 2006 announced on 9 May 2006 proposed significant changes to simplify and streamline superannuation in Australia .

The Government's plan proposes to:

Simplify superannuation arrangements for retirees, making it easier to understand
Improve incentives to work and save; and
Introduce greater flexibility in how superannuation savings can be drawn down in retirement.

The Government is seeking comment from the community. A copy of the paper which outlines the changes can be found here .

If the proposed changes are implemented, we will need to assess the impact on the CSS.

We will advise members via this website once that assessment is made.