Bills Digest no. 68 2006–07
Superannuation (Excess Untaxed Roll-Over Amounts Tax)
Bill 2006
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
Financial implications
Main Provisions
Endnotes
Contact Officer & Copyright Details
Passage History
Superannuation (Excess Concessional
Contributions Tax) Bill 2006
Superannuation (Excess
Non-Concessional Contributions Tax) Bill 2006
Superannuation (Excess
Untaxed Roll-Over Amounts Tax) Bill 2006
Superannuation (Departing
Australia Superannuation Payments Tax) Bill
2006
Superannuation (Self Managed
Superannuation Funds) Supervisory Levy Amendment Bill
2006
Date introduced: 7 December 2006
House: House of Representatives
Portfolio: Treasury
Commencement: 1
July 2007 or Royal Assent.
The following five Bills
implement significant tax changes related to the simplification of
superannuation package in the Tax Laws Amendment (Simplified
Superannuation) Bill 2006. As these Bills each deal with a
significant new tax initiative, for constitutional reasons their
provisions were not included in the main Bill noted above. These
five related bills are:
- Superannuation (Excess Concessional Contributions Tax) Bill
2006
- Superannuation (Excess Non-Concessional Contributions Tax) Bill
2006
- Superannuation (Excess Untaxed Roll-Over Amounts Tax) Bill
2006
- Superannuation (Departing Australia Superannuation Payments
Tax) Bill 2006, and
- Superannuation (Self Managed Superannuation Funds) Supervisory
Levy Amendment Bill 2006.
The background to these Bills is contained in the Bills Digest
covering the Tax Laws Amendment (Simplified Superannuation) Bill
2006. Both this Digest and the Digest on the five related
superannuation Bills should be read together.
Significant changes to the superannuation arrangements were
first announced in the Budget speech for the 2006 07
budget.(1) Since then the government has made additional
changes to the first announced proposals in response to
consultation with both industry and the wider public.(2)
These Bills are part of the outcome of these consultations.
See the Bills
Digest 65, 2006 07 on Tax Laws Amendment (Simplified
Superannuation) Bill 2006.
See the Bills
Digest 65, 2006 07 on Tax Laws Amendment (Simplified
Superannuation) Bill 2006.
See the Bills
Digest 65, 2006 07 on Tax Laws Amendment (Simplified
Superannuation) Bill 2006.
See the Bills
Digest 65, 2006 07 on Tax Laws Amendment (Simplified
Superannuation) Bill 2006.
The following section outlines the main provision of each of
these Bills.
Item 4 of this Bill imposes the excess
contributions tax payable under new section 292-15
of the Income Tax Assessment Act 1997 (ITAA 97). New
section 292-15, as well as the other amendments to the ITAA 97
mentioned in this Digest, are inserted by the Tax Laws Amendment
(Simplified Superannuation) Bill 2006.
Item 5 specifies that the rate of this tax is
to be 31.5 per cent of a person s excess concessional
contributions.
Comment
New section 292-25 ITAA 97
defined a concessional contribution to be an amount contributed
that is part of the assessable income of a superannuation fund plus
an amount specified in regulations in certain limited
circumstances.
For concessional contributions to be part of the
income of a superannuation fund they generally have to be
contributions in respect of which a tax deduction has been
claimed.
Item 4 of this Bill imposes a tax on the excess
non-concessional contributions under new section
292-80 of the ITAA 97.
Item 5 specifies that the tax rate of the tax
imposed by item 4 is 46.5 per cent.
Comment
An excess non-concessional contribution is defined in new
section 292-85 of the ITAA 97 to be amounts in
excess of the non-concessional contributions cap . In turn,
subsection 292-85(2) of this section defined the
non-concessional contributions cap as 3 times the concessional
contributions cap . This latter term is defined in
subsection 292-20(2) as being $50 000 in the 2007
08 year. This latter limit is to be indexed to changes in Average
Weekly Ordinary Time Earnings (AWOTE) in $5 000 increments. See the
Bills Digest for Tax Laws Amendment (Simplified Superannuation)
Bill 2006 for additional commentary on proposed indexation
method.
Item 4 of this Bill imposes a tax on excess
untaxed roll-over amounts under new section 306-15
of the ITAA 97.
Item 5 of this Bill specifies that the tax
payable is the maximum rate worked out column 3 of the table in
Part 1 of Schedule 7 of the Income Tax Rates Act 1986 in
the relevant income year plus 1.5 per cent. Under current tax
arrangements, this would give a tax rate of 46.5 per cent.
Comment
An excess untaxed roll-over amount is defined in new
section 306-15 ITAA 97 as:
- the amount of superannuation benefits, previously untaxed in
the superannuation fund
- rolled over into a new superannuation fund, that
- exceeds the untaxed plan cap amount .
New section 307-350 defined this later term as
$1m for the 2007 08 year.
This latter limit is to be indexed to changes in Average Weekly
Ordinary Time Earnings (AWOTE) in $5 000 increments. See the Bills
Digest for Tax Laws Amendment (Simplified Superannuation) Bill 2006
for additional commentary on proposed indexation method.
A departing Australia superannuation payment is
made to temporary residents (except New Zealanders) after they have
left Australia. It is a refund of their superannuation benefits
accumulated through working in Australia.
Item 4 of this Bill imposes a tax on departing
Australian superannuation payments under new subsection
301-175(2) of the ITAA 97.
Item 5 notes that, under the proposed
arrangements, the rates of tax are:
- tax free component nil
- taxed component 30 per cent, and
- untaxed component 40 per cent.
Comment
These rates are no different to the current tax
rates applied to departing Australia superannuation payments.
Rather, these changes restate the tax rates under the new,
simplified, regime.
Item 1 of Schedule 1 of the
Bill repeals section 6 of the Superannuation
(Self Managed Superannuation Funds) Supervisory Levy Imposition Act
1991 and replaces it with a version that deletes any reference
to a penalty for the late lodgement for the levy.
Comment
Self Managed Superannuation Funds (SMSFs) are the fastest
growing segment of the superannuation industry. Further, they are
the segment of the industry that is attracting increased amount of
the Australian Tax Office s attention.
The Explanatory Memorandum to the Bill notes that the current
penalty for the late payment of the supervisory levy is being
repealed and replaced by the general taxation interest charge
(GIC).(3) The current penalty is $10 for every month
that the supervisory levy remains overdue.(4)
The GIC is set at a high level to encourage the speedy payment
of overdue unpaid amounts. Thus the amount of GIC applied to an
unpaid SMSF levy could well exceed the former $10 per month
penalty. Thus the proposed changes increase the incentive, and
potentially the financial penalty, applying to SMSF trustees who
make late payments of this levy.
- The Hon. Peter Costello MP, Treasurer, Second Reading Speech,
Appropriation Bill No. 1 2006 07, House of Representatives,
Debates, 9 May 2006, p. 57.
- See The Hon. Peter Costello MP, Treasurer, A Plan To Simplify
and Streamline Superannuation Transitional Issues That Apply
Immediately , Media Release, No 57 of 2006, 14 June 2006.
Treasury, A Plan to Simplify and Streamline Superannuation Outcome
of Consultation , 5 September 2006 and The Hon. Peter Costello MP,
Simplified Superannuation Final Decisions , Media Release,
No 93 of 2006, 5 September 2006.
- The Hon Peter Costello MP, Treasurer, Explanatory Memorandum to
Tax Laws Amendment (Simplified Superannuation) Bill 2006 and
Superannuation (Excess Concessional Contributions Tax) Bill 2006,
Superannuation (Excess Non-Concessional Contributions Tax) Bill
2006, Superannuation (Excess Untaxed Roll-Over Amounts Tax) Bill
2006, Superannuation (Departing Australia Superannuation Payments
Tax) Bill 2006, and the Superannuation (Self-Managed Superannuation
Funds) Supervisory Levy Amendment Bill 2006, 7 December 2006, p.
163. This amendment is being made by the Tax Laws Amendment
(Simplified Superannuation) Bill 2006.
- Subregulation 4(2), Superannuation (Self Managed Superannuation
Funds) Supervisory Levy Imposition Regulations 1991.
Les Nielsen
24 January 2007
Bills Digest Service
Parliamentary Library
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ISSN 1328-8091
© Commonwealth of Australia 2007
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Published by the Parliamentary Library, 2007.
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