Bills Digest no. 68 2005–06
Tax Laws Amendment (Superannuation Contributions
Splitting) Bill 2005
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Tax Laws
Amendment (Superannuation Contributions Splitting)
Bill 2005
Date Introduced: 12 October 2005
House: House of Representatives
Portfolio: Treasury
Commencement: Royal
Assent, but the provisions of this Bill will not take practical
effect until the relevant regulations are made specifying how and
when the contributions-splitting regime will operate. These
regulations are expected to provide that contributions made on or
after 1 January 2006 will be able to be split.
A fund member will be able to request a contribution split from
1 July 2006. A splitting request can only be made in respect of
most of the contributions made in the previous financial year;
therefore, a fund member will have to wait until after the close of
the current financial year to request that contributions made on or
after 1 January 2006 be split with their spouse.(1)
The Bill proposes to amend the
Income Tax Assessment Act 1936 (ITAA 36) to facilitate a
person splitting their superannuation contributions with their
spouse. Supporting amendments will have to be made to the:
- Superannuation Industry (Supervision) Regulations 1994 (SIS
Regs)
- Retirement Savings Account Regulations 1997, and
- Income Tax Regulations 1936.
The proposed changes to these regulations are available from the
Treasury web site.(2)
This Bill makes the necessary changes to the ITAA 36 to
facilitate a person splitting both personal and employer
superannuation contributions made during the previous financial
year (including the Superannuation Guarantee Contributions made by
the employer on their behalf) with their spouse. It achieves this
by introducing a new type of rollover eligible termination payment
(ETP), to be known as a contributions-splitting ETP .
The fund member provides the superannuation fund trustee with a
request to divide the previous financial year s splittable
superannuation contributions. If this request is accepted, the
superannuation fund trustee transfers the nominated proportion of
these contributions to the nominated superannuation fund. That
money will, for taxation purposes, be known as a contribution
splitting ETP .
A self employed person will not be able to claim a tax deduction
for amounts that are split with their spouse. They will, however,
be able to claim a tax deduction in respect of contributions that
are not split with their spouse.
Further details on how the proposed contributions splitting
regime will work will be apparent when the required changes to the
regulations are made (see below).
The Commonwealth Government originally announced its
superannuation contribution splitting proposal during the 2001
Election campaign in its A Better Superannuation System
announcement.(3) The proposal was part of a package of
reforms to the superannuation system that the Commonwealth
Government proposed to introduce following the 2001 election. A key
factor in the Commonwealth Government s announcement was the desire
to broaden the accessibility of superannuation to those outside the
paid workforce.(4)
The Commonwealth Government s reasoning for the superannuation
contribution splitting initiative (as announced in the A Better
Superannuation System), and other general media releases
covering its reform of superannuation, was:
to assist families maximise the benefits available in
superannuation and to provide an avenue for spouses to share their
superannuation benefits equally.(5)
In July 2002 the Commonwealth Government released a Consultation
Paper on three options it was considering for the splitting of
superannuation contributions. The options outlined in the
Consultation Paper were:
-
prospective split (each contribution would be split as it was
paid)
-
annual split (contributions would be split after the end of the
financial year in which the contributions were made), and
-
joint accounts (a couple would own a joint superannuation
account similar to a joint bank account).(6)
At that time the Commonwealth Government did not include as an
option the splitting of superannuation benefits (as opposed to
contributions) as it was not consistent with the Government s
election commitment and its higher cost to revenue.(7)
The Explanatory Memorandum to the current Bill covers this
option.(8) The Commonwealth Government indicated that it
would be implementing the annual split option and the current Bill
(and associated draft regulations) follows this model.
(9)
The Government introduced the Taxation Laws Amendment
(Superannuation Contributions Splitting) Bill 2003 into the House
of Representatives on 11 September 2003. This Bill lapsed with the
calling to the 2004 election.
During the 2004 election campaign the Liberal Party of Australia
released Super for All And Understanding Money which
reaffirmed a Coalition Government s commitment to implement
superannuation contribution splitting between couples. This has
been a consistent policy approach since 2001.
The Government s intention to implement superannuation
contributions splitting was again confirmed in the 2005 06 Budget.
However, the proposed model noted in the budget documents differed
from the model contained in the Taxation Laws Amendment
(Superannuation Contributions Splitting) Bill 2003. The Budget
papers proposed that the contribution splitting would be voluntary
for superannuation funds, that is, a superannuation fund trustee
can refuse to split the contributions. The previous proposal was
for a mandatary split of contributions if the member so instructed
the trustees of their superannuation fund. This change was
undertaken following comments from industry that some funds may be
forced to provide contributions splitting where few or no members
have an interest in taking advantage of this
provision.(10)
In a press release covering the introduction of the latest
splitting Bill into Parliament the Hon. Mal Brough MP, the current
Minister for Revenue and Assistant Treasurer, noted that:
Superannuation splitting will allow contributions
to be split' or shared with a spouse. This will allow non-working
or low income spouses to accumulate their own superannuation, and
gives families more choices in how they prepare for their
retirement.(11)
As noted above, the details of how the superannuation
contributions splitting regime will work will be contained in
amendments to various regulations.
Significant points in the proposed regulations relating to
contributions are:
-
contributions splitting will apply only to splittable
contributions made in the previous financial year to an
accumulation fund and some defined benefit funds where part of the
member s benefit is an accumulation interest (proposed SIS Regs
6.42 & 6.43).(12) In effect, only the previous
financial year s contributions can be split with a person s spouse,
and only after the close of the relevant financial year
-
there are no limits on the type of superannuation fund to which
the contributions can be sent. Just how this will work in the case
of defined benefit funds, particularly those whose benefits are
solely determined on a basis other than the accumulated
contributions plus associated investment earnings, remains to be
seen
-
in particular, the spouse, or former spouse, can be a
member of a standard employer sponsored superannuation fund. This
means that the contributions do not have to be split into a public
offer fund (which may charge higher fees), but may go to an account
in the spouses name in their partner s current employer fund
(proposed SIS Reg 3.01(h)(i)), and
-
this will not apply where a person s employer fund is not
a standard employer sponsored fund, such as some public sector
defined benefit funds
A contribution splitting ETP is a preserved benefit. This means
that the receiving spouse cannot withdraw those benefits until
reaching, or being past, their preservation age(13)
(proposed SIS Reg 6.15).
Under proposed SIS Reg 6.42(2) contribution
splitting will not apply to:
-
superannuation monies that have already been rolled over,
transferred or allotted
-
payment from eligible non-resident non-complying superannuation
funds (effectively overseas superannuation funds that do not comply
with Australian superannuation laws and regulations)
-
payments made as a consequence of the termination of employment
or as a result of the disposal of an asset, and
-
superannuation contributions that are subject to a split under
Family Law provisions (proposed SIS Reg 6.43(2)).
Only a person s splittable contributions for the previous
financial year are available to be divided (proposed SIS Regs 6.42
and 6.43).
There are some restrictions on the proportions of the splittable
contributions from the previous financial year that may be
transferred to a person s spouse. Only 85 per cent of a person s
previous years deductible contributions can be split. But 100 per
cent of a fund members personal contributions from the previous
financial year can be split (proposed SIS regulations 6.40 and
6.44(2)(b)).
A deductible contributions is defined in proposed SIS Reg 6.41,
for the purposes of these regulations, to be either:
-
a contributions that is a taxable contribution for the purposes
of section 274 of the ITAA 36. These are amounts that are subject
to the superannuation fund income tax of 15 per cent
-
a contribution that, but for the Commonwealth s inability to tax
the property of a State, would be a taxable contribution for the
purposes of section 274 of the ITAA 36. These are amount paid into
constitutionally protected funds that otherwise are not subject to
the 15 per cent superannuation fund income tax, and
-
an allocated surplus amount, which are defined in proposed SIS
Reg as amounts allocated from a regulated superannuation fund
surplus, by an trustee, to meet an employer s liability to make
contributions. These amounts arise from the surplus earnings of
defined benefit superannuation funds and are allocated to the
member s account instead of the employers contributions to that
fund.
A personal contribution is defined in proposed SIS Regulation
6.41 to be a contribution mad by the taxpayer, or by another
person, to a regulated superannuation fund, in relation to which no
tax deductions are allowable.
The superannuation fund trustee may accept an
application split benefits if all the relevant requirements are met
(proposed SIS Reg 6.44.). They may decline to accept the
application even though all the necessary requirements for such a
split have been met:
- one reason for
such a refusal would be if splitting the previous financial year s
contributions left insufficient funds in the employee s account to
meet a tax liability or fund charges.(14)
Proposed SIS Reg 6.44 notes that applications to split the
previous year s contributions are invalid when:
-
a member has already made an application in relation to the same
spouse and the trustee is considering the first application or has
already given effect to that application
-
if the amount of benefits to which the application
relates exceeds the maximum splittable amount
-
the member s spouse is aged 65 years or more, or the member s
spouse is aged between the relevant preservation age and 65 years
of age and permanently retired.
These conditions effectively restrict the number of application
to one a year, restrict the amount of previous year s contributions
that can be split and prevent amounts being transferred to a spouse
who is over 65 years of age or who has retired from the
workforce.
Under proposed SIS Reg 6.44(3) the application to split an
employee s contribution must be accompanied by a statement from the
spouse that they:
-
are not retired if they are between their relevant preservation
age and age 65, or
-
are below their relevant preservation age.
For those born before 1 January 1960 their preservation age is
55. If a person is born between 1 January 1960 and on or before 30
June 1964 their preservation age is between 56 and 59. For those
born on or after 30 June 1964 their preservation age is
60.(15)
Under proposed SIS Reg 6.44(4) the application must specify the
amount of the :
that are to be split with the member s spouse.
This requires the member to keep accurate records of the
contributions made during the previous financial year. [Otherwise,
the member will have to apply to their superannuation fund to
obtain this information.]
Under proposed SIS Reg 6.45, if a valid application is accepted
by a fund trustee they must split the contributions as soon as
practicable, but in any case within 90 days of receiving that
application.
Importantly, a receiving spouse that meets the above age and
retirement requirements can commence to be paid a non-commutable
income stream (on or after they reach their preservation age) and
still take advantage of these new provisions.
These Regulations have not been tabled, and are subject to
comments from both the superannuation industry and public.
Accordingly, these points may differ from the regulations finally
tabled in Parliament.
The current draft regulations have been subject to extensive
industry comment. The initial draft regulations allowed all of a
person s contributions made in the previous financial year to be
split with their spouse. As noted above the current draft
regulations limit the amount of the previous year s contributions
that can be split.
The Association of Superannuation Funds of Australia (ASFA)
stated in its response to the 2002 Consultation Paper that it:
supports Government policies that assist families, especially
those with broken paid work patterns, to maximise the benefits
available in superannuation and in retirement. The splitting
proposal could improve the economic position of women (and couples)
where one spouse is only able to work part time or for a reduced
period of time.(16)
However, ASFA suggested that a better result could be achieved
in terms of maximising retirement benefits, along with providing a
simple and efficient system, if the splitting occurred at the
retirement point of either spouse. ASFA recognises that this leads
to the non-working spouse not having control over superannuation
assets to the same extent as through annual contributions
splitting, but believes it will give a better outcome in the
future. They also recognise that their proposal will probably need
to be restricted to benefits accumulated after a specific date due
to budgetary constraints.(17) Both the Investment and
Financial Services Association (IFSA)(18) and CPA
Australia(19) also support the splitting of
superannuation at the end benefit, or retirement stage.
ASFA has also observed that there would be a low take up rate of
contribution splitting by younger couples and that it would be more
attractive to more mature people that actively plan and supplement
their retirement income saving. Nevertheless, ASFA stated it was
concerned about the complexity of the options in the consultation
paper and the impact it would have on administration costs for
funds.
Other suggestions included in submissions to the Commonwealth
Government in response to the 2002 consultation Paper were:
-
allowing 100 per cent of employer contributions (that is the
employer s Superannuation Guarantee payments made on behalf of the
employee and other employer contributions) being available for
splitting [supported by the Corporate Superannuation Association
and the Law Council of Australia]
-
extending the policy to defined benefit funds [supported by the
Law Council of Australia], and
-
giving funds the flexibility to determine the splitting
administrative processes (prospective splitting, annual splitting
or some other option) based on their structure and current
administrative set up [supported by the Law Council of
Australia].(20)
More recent comment by the superannuation industry has welcomed
the current bill. In a press release following the 2005 06 budget
ASFA noted that
ASFA also welcomes the introduction of
superannuation splitting arrangements from 1 July 2006. This will
allow a fund member to split their compulsory and personal super
contributions with their spouse, to enable them to receive part of
the contribution. This improves the taxation position for families
at retirement.(21)
Deputy Chief Executive of the Investment and Financial Services
Association (ISFA), Mr John O Shaughnessy has noted:
ISFA has long supported the principle that couples
should be able to plan effectively for retirement together .The
Assistant Treasurer and Treasury are to be commended on this
Bill.(22)
The advantages of the superannuation contribution splitting
policy are:
-
single income couples will have access to two ETP low rate
thresholds(23) and two separate Reasonable Benefit
Limits (RBL)(24)
-
if the superannuation benefits are converted to income streams
in retirement each member of the couple will have access to the
superannuation pension and annuity rebate(25)
-
low income and non-working spouses will have access and control
of their own superannuation, and
-
both members of a couple can make superannuation savings when
they cannot afford voluntary contributions.
The disadvantages of the superannuation contribution splitting
policy are:
-
two separate accounts for single income couples could result in
two lots of fees and charges for what is effectively one
contribution
-
additional administration and system costs for superannuation
funds
-
comparatively disadvantages older workers who will have little
time to build up significant benefits from the contribution
splitting initiative
-
comparatively disadvantage members of some defined benefit funds
who will not be able split their benefits with their spouse,
and
-
comparatively disadvantages those who are not in a traditional
relationships, as the regulations require that contributions can
only be split with a spouse
-
the term spouse is defined in subsection 6(1) ITAA 36 as
spouse , in relation to a
person, includes another
person who, although not legally married to the
person, lives with the
person on a
bona
fide domestic basis as the husband or wife of the
person(27)
-
otherwise, the term spouse bears its ordinary meaning of a
person being either a husband or wife, that is a person of the
opposite sex. (28)
The major advantage will be to allow couples to access two ETP
lower rate tax thresholds. The contributions that are sent to the
receiving spouse are all classed as post 1983 contributions
(Item 3 of Schedule 1) as are the
earnings of those monies. In the 2005 06 year the first $129,751 of
post 1983 amount received as a lump sum is tax free.
Access to two RBL limits is an advantage to comparatively few
couples, as the majority of those receiving superannuation benefits
upon retirement are not affected by either the lump sum or pension
RBLs.
Estimated short term costs to revenue of the proposed annual
split model are(29):
|
Year
|
2007 08
|
2008 09
|
|
Cost
|
$4.0m
|
$4.7m
|
Source: Explanatory Memorandum, Taxation Laws Amendment
(Superannuation Contributions Splitting) Bill 2005. 12 October
2005, p .4.
In 20 years the cost to revenue in a single year may increase to
approximately $25 million and after 40 years approximately $100
million per year in real dollar terms. This will be a significant
cost to revenue at a time when the Federal Budget will be straining
to meet the demands of an aging population.(30)
In its consideration of the now lapsed 2003 Contributions
Splitting Bill (prorogued due to 2004 elections) the Australian
Labor Party (ALP) reserved its position on whether it is going to
support superannuation contribution splitting until the Senate
Economics Legislation Committee has complete its review of the
Bill. The ALP were concerned that the people who will benefit most
from superannuation contribution splitting will be high income
earners and their spouses, with little benefit going to low income
earners.(31)
Recently, Labour s Finance spokesman, Mr Lindsay Tanner MP,
criticised the splitting proposal because no projected benefits or
savings levels had been calculated.(32)
As at the date of writing the current Bill had been passed by
the House of Representatives. In the second reading debate on 10
November 2005, Ms Jill Hall MP put forward Labor s position on this
Bill, making the following points:
-
the measure would not result in additional superannuation
contributions being made
-
the split superannuation benefits would be subject to two sets
of fees, instead of one
-
the measure would benefit mainly higher income earners by
allowing access to two low tax eligible termination payment
thresholds when the benefits were taken as a lump sum
-
the measure would also benefit very high income earners through
access to two reasonable benefit limits for what was essentially
the one superannuation benefit (as noted below a reasonable benefit
limit controls the amount of concessionary taxed superannuation
benefits that can be received by an individual)
-
the measure would not apply to same sex couples, or to members
of defined benefit superannuation funds
-
the measure increases superannuation fund administration costs,
and
-
the measure increases the intergenerational costs of retirement
due to the foregone revenue.
In Labour s view, these points indicate that the government is
dealing with superannuation issues in a piecemeal fashion. Despite
these concerns Labor did not oppose the Bill.(33)
Recent debate in the Parliament regarding the amendment of the
definition of spouse to cover same-sex couples may again be raised
context of this Bill, given that the proposed regulations and
legislation require that a person s superannuation contributions
can only be split with their spouse. In this regard, the Shadow
Minister for Environment and Heritage, Mr Anthony Albanese has
called for contributions splitting to apply to members of same sex
couples.(34)
Item 1 of Schedule 1 inserts
the definition of a contributions-splitting ETP into the ITAA
36.
Item 3, in combination with Item
9 requires that a contribution-splitting ETP , when it is
first transferred to the receiving spouse s superannuation fund,
has a service period of zero days.(35) These items
ensure that a contributions-splitting ETP will only contain post
1983 money.
Item 8 protects a contributions-splitting ETP
from being considered an ETP in paragraph (b) of the definition of
eligible termination payment in sub
section 27A(1) ITAA 36. This paragraph deals with
the definition of ETPs that have been reduced in circumstances
where the taxpayer has received payment from the now obsolete
section 23FB ITAA 36 funds, receives valuable
consideration in return for the transfer of a right to receive
payments from an old section 23F ITAA 36 fund, or
other valuable consideration from such actions in respect of other
funds.
Item 15 ensures that a contributions-splitting
ETP will always be a qualifying ETP .
A qualifying ETP is one that is subject to the concessional tax
rates applying to superannuation benefits on withdrawal and is able
to be the basis of a pension or annuity that qualifies for the
pension and annuity tax rebate. Further, only a qualifying ETP can
be rolled over between superannuation funds. A non-qualifying
component of an ETP is assessable as ordinary income and taxed at
ordinary rates.
Item 16 amends the table in subsection
27AB(1) to include contributions-splitting ETPs . The
practical effect is to ensure that such ETPs are classed as coming
from a taxed source. ETPs that come from a taxed source are subject
to lower rates of tax upon withdrawal from the superannuation
environment.
Item 17 allows for regulations to be made in
relation to contributions-splitting ETPs .
Item 18 requires the trustee paying the
contributions splitting ETP to provide the Commissioner for
Taxation with the information specified in the relevant
regulations. This provision is needed to administer the RBL
elements of the superannuation system.
Item 20 inserts new subparagraph (d) into
section 82AAT(1B) ITAA 36. This particular section
prevents eligible persons (generally the self employed) from
claiming a deduction for superannuation contributions:
-
for which a deduction has already been claimed
-
after they cease to be a member of the particular
superannuation fund to which the contributions was made, and
-
specifies that once a notice has been given to the
superannuation fund trustee of the person s intention to claim a
deduction in respect of a contribution it cannot be revoked.
The mechanism by which a tax deduction is claimed is that an
eligible person gives the trustee of the superannuation fund a
notice of their intention to claim such a deduction (see
section 82AAT(1A)).
New sub-paragraph (d) prevents the member from giving notice to
the trustee of a superannuation fund of any intention to claiming a
tax deduction in respect of monies that make up a
contributions-splitting ETP. Item 22 has the same
effect in respect of contributions-splitting ETPs paid from
Retirement Savings Accounts.
Superannuation contributions splitting will narrow the tax base
by potentially reducing the amounts subject to tax once the
benefits are withdrawn.
One argument against the implementation of the superannuation
contributions splitting initiative is that the main beneficiaries
will be high income earners who are fast approaching the reasonable
benefit limit.(36) Evidence provided by both AFSA and
Treasury to the Senate Select Committee on Superannuation s Inquiry
into Superannuation and standards of living in retirement was that
very few people s superannuation benefits reach either the lump sum
or the more generous pension RBL limit, thereby attracting tax on
amounts over these limits at higher rates. Generally, lump sum
balances on average are small compared to the limits available.
Evidence provided by the Treasury cited in the Committee s
report,(37) issued in December 2002, included:
that the average superannuation holding per person is about $62
000 and that average superannuation payouts are currently around
$72 000 per person.(38)
The Senate Committee s report also noted that evidence provided
by ASFA was that each year approximately 650 people, out of
approximately one million or so taxpayers in the age group
receiving superannuation benefits, are paying tax on excess
benefits. That is, their superannuation benefits benefits exceed
their RBLs.(39)
For the 2003-04 year of income the lump sum RBL was $588 056 and
the pension RBL was $1 176 106. For the 2005 06 year the RBLs are
$648 946 and 1 297 886 respectively.
There is little likelihood, given that the average payout was
around $72 000 in 2003 04, and that the RBLs increase in line with
increases in the Average Weekly Ordinary Time Earnings (AWOTE),
that many people will exceed their RBLs. The average lump sum
payout did not even exceed the then ETP low rate threshold of $117
576 in 2001 02 (now $129 751).
The estimated average size of superannuation benefit for 20 per
cent of those between 50 and 69 is above $100 000, but still
comfortably below the current low rate ETP
threshold.(40) It is unlikely to exceed this limit in
the years to come, as it also increases each year in line with
increase with AWOTE.
Some high income earners will probably make use of contributions
splitting to remain under their RBLs. The main beneficiaries may be
very high income earners, whose superannuation benefits are more
than likely to exceed their RBLs, but who have a low income spouse.
But given the possible number of taxpayers involved and that only
future contributions will be able to be split, the impact in the
short term will be very small.
These points mean that, currently, the impact of this measure
upon tax revenue foregone will be small, if at all noticeable. It
is difficult to predict whether there will be a significant
increase in the number of tax payers whose superannuation benefits
exceed their RBLs. However, as more people spend longer in the
superannuation system, the number of such taxpayers may well
rise.
If the number of people affected by the RBLs does rise, this
measure may potentially lead to a significant loss of tax revenue.
This impact may occur the effects of the ageing population will
have begun to affect the Federal Budget. However, a whole of Budget
approach covering loss of revenue, reduction in welfare benefits
and reduction in Government funded health care and aged care costs
resulting from taxpayers taking advantage of the superannuation
contributions splitting provisions needs to be considered before
any judgment can be made with respect to the equity, or otherwise,
of this policy.
In the long run allowing an employee to split their employer
superannuation guarantee contributions will result in a lower
superannuation benefit for the employee. However, taking into
account the advantages of a couple having access to two ETP low
rate threshold limits and/or pension rebates and two lump
sum/pension RBLs, they may be better off splitting superannuation
guarantee contributions.
Some sections of the media have suggested that one reason for
introducing superannuation contribution splitting is to prevent
taxpayers taking advantage of the recently commenced splitting of
superannuation benefits in the event of divorce by entering into a
sham divorce.(41) While this is possible, such a
suggestion by a financial planner to a client so that they can stay
under their RBLs and not pay any excess tax, would be
unlawful.(42) Such a scheme may also result in the ATO
taking a closer look at the actions of the taxpayer. This would be
an expensive way of saving some tax and could potentially backfire
on the high income spouse if the divorce remains permanent when
that had not been the original plan.
High income earners will eventually benefit from the
implementation of this policy, but by the time they receive this
benefit, middle income earners and those low income earners who are
able to take advantage of the policy will also be receiving
benefits. The viability of the policy should not be dismissed
because of a view that it benefits high income earners more than
low income earners. These changes may also result in high income
earners becoming less of a burden on the Federal Budget in the long
term.
The main problem will be convincing young couples to take
advantage of this policy, when it is an accepted fact that young
people tend to concentrate on other issues such as paying off
mortgages and educating children.(43)
-
Thomson ATP, Superannuation splitting between spouses Bill
Weekly Tax Bulletin, 14 October 2005, item 1721, p.
1621.
-
See Treasury Web Site at
http://www.treasury.gov.au/contentitem.asp?NavId=002&ContentID=1018
(accessed 14 October 2005), and revised regulations at
http://www.treasury.gov.au/contentitem.asp?NavId=002&ContentID=1037
(accessed 24 November 2005)
-
A Better Superannuation System , The Howard Government:
Putting Australia s Interests First: Election 2001: Our Future
Action Plan: A Better Superannuation System, the Hon. John
Howard, Prime Minister, Liberal Party of Australia, 5 November
2001, p. 4.
-
ibid., p. 2.
-
Revitalising Superannuation , Media Release: C040/03,
Senator, the Hon. Helen Coonan, Minister for Revenue and the
Assistant Treasurer, 25 May 2003.
-
Splitting
of Superannuation Contributions Between Couples Consultation Paper
July 2002, issued by Senator the Hon. Helen Coonan, then
Assistant Treasurer and Minister for Revenue, Department of the
Treasury, Canberra, July 2002, p. 6. ( Consultation Paper )
-
Consultation Paper, p. 6.
-
The Hon Peter Costello MP. Explanatory Memorandum, Taxation Laws
Amendment (Superannuation Contributions Splitting) Bill 2005. 12
October 2005, p.20.
-
The Hon. Peter Costello MP, Treasurer, Explanatory Memorandum,
Taxation Laws Amendment (Superannuation Contributions Splitting)
Bill 2003, 11 September 2003, p. 3. I am indebted to a previous
Bills Digest on the topic of superannuation contribution splitting
for material in the preceding section, see Graeme Selleck, Taxation
Laws Amendment (Superannuation Contributions Splitting) Bill 2003 ,
Bills Digest No. 59, Parliamentary Library, Canberra, 2003 04 at
http://www.aph.gov.au/library/pubs/bd/2003-04/04bd059.htm
accessed 18 August 2004.
-
The Hon. Peter Costello MP, Treasurer, Budget Measures
2005 06, Budget Paper No. 2, 10 May 2005, p.
32.
-
The Hon. Mal Brough MP, Minister for Revenue and Assistant
Treasurer, A Super Idea for Families Media Release, 12 October
2005.
-
A Defined Benefit superannuation fund that has an accumulation
interest is known as a Hybrid Fund. The Commonwealth Superannuation
Scheme is such a fund because its benefits are made up of an
accumulation interest (the member s own contributions plus
associated investment earrings) and a defined benefit interest the
member s pension based on the members years of service and final
average salary.
-
For those born before 1960 preservation age is 55. For those
born on or after 1 January 1960 preservation age is 56 to 60,
depending on date of birth.
-
Thomson ATP, Superannuation splitting between spouses Bill
Weekly Tax Bulletin, 14 October 2005, item 1721, p.
1622.
-
Superannuation Industry (Supervision) Regulation 6.01.
-
ASFA Response to Government Consultation Paper Splitting of
Superannuation Contributions Between Couples issued by the
Association of Superannuation Funds of Australia Ltd, Sydney,
August 2002 ( ASFA Submission ).
-
ASFA Submission.
-
Split Spouse Contributions , IFSA Voice, November 2002,
p. 4.
-
Splitting of Superannuation Contributions Between
Couples issued CPA Australia, Sydney, 23 August 2003.
-
Graeme Selleck, ibid.
-
Association of Superannuation Funds of Australia, Budget Pretty
Super , Media Release, 10 May 2005.
-
Government to allow super splitting , Financial
Standard, 13 October 2005, and Investment and Financial
Services Association, Split Super contributions will help couples
do it better in retirement Media Release, 12 October
2005.
-
An ETP Low Rate Threshold is the amount of taxed post 1983
superannuation benefits (superannuation that has been accumulated
after 1 July 1983 and has been subject to superannuation fund
income tax) that can be received after a person s preservation age
tax free. In the 2005 06 tax year the low rate threshold is $129
751.
-
A Reasonable Benefit Limit is a lifetime limit on the amount of
concessionally taxed superannuation benefits a person can receive.
In the 2005 06 year the lump sum RBL is $648 946 and the pension
RBL is $1 297 886. These limits are indexed each 1 July according
to the increase in the Average Weekly Ordinary Time Earnings
(AWOTE) calculated by the Australian Bureau of Statistics.
-
Where a person receives an eligible termination payment and uses
it to purchase an annuity or pension from a taxed superannuation
fund and the person is 55 or more years of age, the person is
entitled to a tax rebate, at 15 per cent, on the assessable part of
the annuity or pension payment that is not in excess of the person
s reasonable benefit limit.
-
The low rate ETP tax threshold is the amount under which no tax
is charged on the lump sum superannuation benefit withdrawn.
-
See also section 10 of the Superannuation Industry
(Supervision) Act 1992 or section 20 of the Retirement
Savings Account Act 1997 which basically reinforce
this definition.
-
The Concise Oxford English Dictionary, 7 edition, p. 1027.
-
The Hon Peter Costello MP. Explanatory Memorandum, Taxation Laws
Amendment (Superannuation Contributions Splitting) Bill 2005. 12
October 2005, p.4.
-
Graeme Selleck, ibid.
-
Graeme Selleck, ibid.
-
Cited in Scott Murdoch, Super taxes to stay , Herald
Sun, 15 October 2005.
-
Ms Jill Hall MP, Deputy Opposition Whip, Second reading: Tax
Laws Amendment (Superannuation Contributions Splitting) Bill 2005 ,
House of Representatives, Debates, 10 November 2005,
p. 92.
-
Mr Anthony Albanese MP, Shadow Minister for the Environment and
Heritage, Shadow Minister for Water, Super contribution Splitting
Must Apply to Same Sex Couples Media Release, 10 November
2005; See also Mr Anthony Albanese MP, ibid, Second reading: Tax
Laws Amendment (Superannuation Contributions Splitting) Bill 2005 ,
House of Representatives, Debates, 10 November 2005,
p. 96.
-
An ETP s service period is used to determine whether, and in
what proportions, these monies are classed as either pre 1983 or
post 1983. This determination has a major impact on the taxation of
the benefits upon withdrawal. These items ensure that a
contributions-splitting ETP will only contain post 1983 money.
-
Simon Hoyle, Spouse super split: Options and ambiguities ,
Australian Financial Review, 27 July 2002, John
Wasiliev, Go-ahead for lower surcharge, splitting , Australian
Financial Review, 13 October 2004, p. 32.
-
Senate Select Committee on Superannuation, Superannuation
and standards of living in retirement - Report on the adequacy of
the tax arrangements for superannuation and related policy,
Canberra, December 2002.
-
ibid., p. 106.
-
ibid., p. 107.
-
Simon Kelly, Carol Farbotko and Ann Harding, The lump sum:
here today, gone tomorrow, AMP/National Centre for Social and
Economic Modelling Wealth Report Issue 7, March 2004, p. 6.
Significantly, this estimated was based on data from 2003. In 2005
it is likely that more than 20% of retirees have superannuation
benefits well over $100 000 in value.
-
Daryl Dixon, Split the difference , Bulletin with
Newsweek, 27 August 2002, p. 45.
-
Family Law Act 1975 (Cth), s. 90MZG.
-
Again, I am indebted to a previous Bills Digest on the topic of
superannuation contribution splitting for material in the preceding
section, see Graeme Selleck, Taxation Laws Amendment
(Superannuation Contributions Splitting) Bill 2003 , Bills Digest
No. 59, Parliamentary Library, Canberra, 2003 04 at http://www.aph.gov.au/library/pubs/bd/2003-04/04bd059.htm
accessed 18 August 2004.
Leslie Nielson
28 November 2005
Bills Digest Service
Information and Research Services
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