Bills Digest no. 45,
2016–17
PDF version [1204KB]
Kai Swoboda
Economics Section
23
November 2016
Contents
The Bills Digest at a glance
Purpose and structure of the Bills
Background
Overview of superannuation tax
arrangements
Existing arrangements
Recent changes
Policy development
2016–17 Budget announcement
2016 election policy and policy
adjustment
Treasury consultation
Emergence of concerns
Sustainability
Value of superannuation tax
concessions
Impact of an ageing population
Fairness
Rudd/Gillard Governments
Abbott Government
Turnbull Government
Key superannuation figures and
information
Value of superannuation savings
The importance of superannuation for
household savings
Individual superannuation savings and
contributions
Committee consideration
Senate Economics Committee
Senate Standing Committee for the
Scrutiny of Bills
Policy position of non-government
parties/independents
Australian Labor Party
2015 announcement
Subsequent August announcement
Subsequent November announcement
Other parties and independents
Australian Greens
Liberal Democrats
One Nation
Nick Xenophon Team
Which elements of the package have
bipartisan support?
Position of major interest groups
Superannuation industry groups
Professional bodies
Thinktanks/research groups
Other groups
Financial implications
Statement of Compatibility with Human
Rights
Key issues and provisions
How many people are affected by the
proposed changes?
Schedule 1—Transfer balance cap
Commencement
Key provisions
Is a $1.6 million cap too high,
too low, or about right?
Application to defined benefit fund
members
Certain factors given special
treatment in relation to the $1.6 million cap
Schedule 2—Concessional
superannuation contributions and income threshold for the imposition of an
additional 15 per cent contributions tax
Commencement
Key provisions
Concessional contributions cap
Lower the income threshold for the
imposition of an additional 15 per cent contributions tax from
$300,000 to $250,000
Table 3: Tax assessments for
taxpayers liable for the additional 15 per cent tax on concessional
contributions, 2013–14 to 2015–16
Schedule 3—Non-concessional
contributions
Commencement
Key provisions
Schedule 4—Low income superannuation
tax offset
Commencement
Key provisions
Schedule 5—Deducting personal
contributions
Commencement
Key provisions
Schedule 6—Unused concessional cap
carry forward
Commencement
Key provisions
Schedule 7—Tax offsets for spouse
contributions
Commencement
Key provisions
Schedule 8—Innovative income streams
and integrity
Commencement
Key provisions
Remove the earnings tax exemption in
respect to transition to retirement income streams
Extend the earnings tax exemption to
new ‘lifetime’ products
Schedule 9—Anti-detriment provisions
Commencement
Key provisions
Schedule 11—Dictionary
Date introduced: 9
November 2016
House: House of
Representatives
Portfolio: Treasury
Commencement: Various
dates as set out in the body of this Bills Digest
Links: The links to the Bills,
their Explanatory Memoranda and second reading speeches can be found on the
home pages for the Treasury
Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 and the Superannuation
(Excess Transfer Balance Tax) Imposition Bill 2016, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at November 2016.
The Bills Digest at a glance
Suite of legislation
The Government has introduced three Bills as part of a
suite of legislation:
This Bills Digest deals with only the first two of those
three Bills. The third Bill is the subject of a separate Bills Digest.
Purpose of the Bills
- The Bills include amendments to various tax and superannuation
laws to implement most of the elements included in the Government’s 2016–17
Budget ‘Superannuation Reform Package’, as modified by the Government in
September 2016.
Measures included in the Bills
- The Bills include the necessary amendments to implement most of
the key measures as outlined in September 2016, including providing for an
indexed $1.6 million cap on tax-free earnings on superannuation earnings,
reducing contributions caps to limit monies paid into superannuation, reimbursing
tax paid on superannuation contributions by low income earners and increasing
tax rates on superannuation contributions for higher income earners.
Policy rationale
- The Government uses a number of different arguments to support
the introduction of the measures. These include improving ‘fairness’,
‘sustainability’, ‘flexibility’ and ‘integrity’.
- The broader backdrop to the package of measures is to provide
savings to improve the budget position.
Policy position of non-government parties
- The ALP supports many elements of the package of measures and has
proposed amendments to several measures. The ALP opposes two measures relating
to removing restrictions to allow all individuals up to the age of 75 to claim
an income tax deduction for contributions and allowing catch-up concessional
contributions for individuals. That said, the ALP has indicated that it will ‘facilitate’
the passage of the Bills through the Parliament.
- It is unclear what the position of other parties and independents
will be on the Bills.
Stakeholder views
- The package of measures has the broad support of superannuation
industry groups, although certain elements, such as the lower concessional
contributions caps, are opposed by some industry groups.
Key issues
-
Issues relating to ‘fairness’ and ‘sustainability’ of
superannuation tax concessions have been on the policy agenda for a number of
years. The proposed measure to cap tax-free earnings on superannuation at a
balance of $1.6 million and to limit other superannuation contributions
using this balance provides a basis for reducing the tax concession available
to higher income earners.
- This Digest includes discussion of schedules of the Bill for
which analysis had been completed at the time of publication. An updated Bills
Digest that includes those schedules not analysed here, may be provided at a
later date.
Purpose and
structure of the Bills
The purpose of the suite of Bills is to implement the
Government’s 2016–17 ‘Superannuation Reform Package’ of measures, as modified
by the Government in September 2016. Most of the amendments apply to the Income Tax
Assessment Act 1997 (ITAA 1997).
The Treasury Laws Amendment (Fair and Sustainable
Superannuation) Bill 2016 (the main Bill) includes the amendments to implement
the following measures:
- impose
a $1.6 million transfer balance cap on the amount of superannuation capital, to
be indexed in $100,000 increments, that can be transferred to the tax-free
earnings retirement phase of superannuation (Schedule 1)
- reduce
the annual concessional contributions cap to $25,000, to be indexed in $2,500
increments (Schedule 2)
- lower
the income threshold at which an additional 15 per cent tax applies on
concessional superannuation contributions to $250,000 (Schedule 2)
- lower
the non-concessional contributions cap to four times the concessional cap
(initially $100,000) (Schedule 3)
- refund
superannuation contributions tax paid by lower income earners through the low
income superannuation tax offset (Schedule 4)
- remove
the requirement that an individual must earn less than ten per cent of
their income from employment-related activities to be able to deduct a personal
contribution to superannuation and make it a concessional contribution (Schedule
5)
- allow
for catch-up concessional contributions by allowing individuals to carry
forward unused concessional contribution amounts from the previous five years if
they have a total superannuation balance of $500,000 or less (Schedule
6)
- increase
the income threshold for the spouse of a taxpayer from $13,800 to $40,000 at
which the taxpayer can claim a tax offset of up to $540 per year for
superannuation contributions made on behalf of their spouse (Schedule 7)
- remove
the tax exemption for transition to retirement income streams and remove tax
barriers to the development of income stream products such as deferred lifetime
annuities (Schedule 8)
- remove
the so-called ‘anti detriment’ provisions which allow an income tax deduction on
some lump sums paid because of the death of a member for the benefit of their
spouse, former spouse or child, to compensate them for income tax paid by the
fund in respect of contributions made for the member during their lifetime (Schedule
9)
- change
a number of administrative processes relating to the payment of amounts to the
Commissioner of Taxation by superannuation funds relating to certain
superannuation fund members (Schedule 10).
Schedule 11 of the main Bill inserts a number of
key definitions into the ITAA 1997 that relate to the measures.
The purpose of the Superannuation (Excess Transfer Balance
Tax) Imposition Bill 2016 is to specify the tax rate (15 per cent or
30 per cent) that applies to earnings on amounts that exceed an
individual’s transfer balance cap.[1]
This Bills Digest does not provide any commentary or
analysis in relation to the Superannuation (Objective) Bill 2016, which is discussed
in the Explanatory Memorandum for the suite of Bills. The Superannuation
(Objective) Bill 2016 will be covered in a separate Bills Digest.
Background
Overview of
superannuation tax arrangements
Existing arrangements
The broad approach to the taxation of superannuation in
Australia is for a 15 per cent tax to be applied to certain contributions,
a 15 per cent tax to be applied to earnings within the fund and for
superannuation benefits to be tax-free from the age of 60. This approach to
taxation is supported by arrangements that limit contributions by employers,
individuals (pre- and post-tax) and the conditions under which superannuation
can be accessed, such as the age at which superannuation can be withdrawn (the
‘preservation age’).
The existing tax treatment for accumulation funds—the more
common type of arrangement where the final benefit to an individual is related
to contributions to the fund and investment earnings of the fund—and the limits
on contributions are outlined in Figure 1.
Figure 1: Tax treatment of superannuation savings: accumulation funds
Source: Australian Government, Re:think:
tax discussion paper: better tax system, better Australia, The
Treasury, Canberra, 30 March 2015, p. 69.
Recent
changes
The existing arrangements have broadly been in place since
July 2007. That said, changes have been made over the past decade, mostly under
the Rudd-Gillard-Rudd Governments, to tax arrangements and the framework
influencing superannuation contributions, including:
- a
reduction in concessional caps (which are also linked to non-concessional caps
as these are set at six times the value of concessional caps) from
$50,000 for those aged less than 50 and $100,000 for those aged more
than 50 for the 2007–08 financial year to a uniform $25,000 for all ages
in 2012–13. This amount was then increased and age differentiation
re-introduced to be $30,000 for those aged less than 49 and
$35,000 for those aged 49 or more in the 2016–17 financial year[2]
- the
introduction of the low income superannuation contribution (LISC) from the
2012–13 financial year to effectively reimburse into a superannuation fund the
15 per cent contributions tax paid by those on an annual income of
$37,000 or less.[3]
The LISC is legislated to be abolished after the end of the 2016–17 financial
year[4]
- the
introduction of an additional 15 per cent contributions tax from the
2012–13 financial year for individuals earning above a $300,000 income
threshold[5]
- the
scaling back of the government co-contribution (a government contribution to
the superannuation fund of eligible low income earners who make undeducted
personal contributions), from a maximum co‑contribution of $1,500 and to
a lower income threshold of $28,000 in 2004–05 to a maximum of $500 at a lower
income threshold of $36,021 for 2016–17[6]
- an
increase in the employer contribution rate under the superannuation guarantee
scheme from nine per cent in 2012–13 to 9.5 per cent over the period
2014–15 to 2020–21 and then progressively increasing to 12 per cent by 2025–26.[7]
In general terms, these changes have provided some
additional support for lower income earners and reduced, to some extent, the
ability of higher income earners to make additional superannuation
contributions.
Policy
development
2016–17
Budget announcement
The measures included in the suite of Bills were announced
by the Government as part of the 2016–17 Budget. The ten separate
measures—packaged together under the title ‘Superannuation Reform Package’—can be
broadly characterised into three categories: those that limit tax concessions
for higher income earners or those individuals with high superannuation balances;
those that support the ‘integrity’ of superannuation tax concessions; and
measures that support low income earners or provide greater flexibility to make
additional contributions for those who have been unable to do so. The measures
comprised:
- measures
impacting on higher income earners and those with a capacity to make additional
contributions
- introduce
a $1.6 million cap on superannuation balances to limit tax-free investment
earnings for those in the pension phase
- introduce
a lifetime cap of $500,000 for non-concessional superannuation contributions
- apply
a 30 per cent tax on contributions for those earning $250,000 or more (current
threshold $300,000) and reduce the concessional contributions cap to $25,000
(currently $35,000 for those aged 49 and over and $30,000 for those aged less
than 49)
- 'integrity'
measures
- remove
the anti-detriment provision in respect of death benefits from superannuation.
This essentially provided for a refund of contributions tax paid in certain
circumstances
- remove
the tax exemption on earnings of assets supporting Transition to Retirement
Income Streams, which allows a tax-free drawdown from superannuation whilst
continuing to work
- measures
supporting low income earners or allowing for limited additional or more
flexible contributions arrangements
- introduce
the Low Income Superannuation Tax Offset to essentially continue the existing
Low Income Superannuation Contribution scheme that compensates low income
earners for the 15 per cent contributions tax for those earning less than
$37,000
- allow
catch-up concessional contributions for individuals with unused amounts within
their annual concessional contributions cap for those with a superannuation
balance of less than $500,000
- remove
restrictions for those aged 65 to 74 from making superannuation contributions
- raise
the threshold for the low income spouse contributions threshold from $10,800 to
$37,000
- remove
restrictions to allow all individuals up to the age of 75 to claim an income
tax deduction for contributions.[8]
The main policy rationale for the introduction of the
package was to better target the existing tax concessions within the context of
broader budget ‘repair’. The Treasurer, Scott Morrison, noted in his budget
speech:
Together with raising your children and owning your own home,
becoming financially independent in retirement, is one of life’s great
challenges and achievements.
We need to ensure that our superannuation system is focussed
on sustainably supporting those most at risk of being dependent on an Age
Pension in their retirement, which is the purpose of these concessions.[9]
2016
election policy and policy adjustment
During the 2016 election campaign and following the election,
the Government was reportedly under pressure from some of its own members to
make changes to some elements of the package, particularly the backdated commencement
of the $500,000 lifetime cap on non-concessional contributions.[10]
On 3 June 2016, the Prime Minister was asked whether the
measures as announced at the 2016–17 Budget were ‘ironclad’. In response, the
Prime Minister noted:
[The superannuation policy as detailed in the May 3 budget]
is absolutely ironclad. Yes, the commitment[s] that we have made in the budget
are our policy. If we are returned we’ll implement those policies. I believe
they are fair. They make the super system, more flexible and more sustainable.
The big beneficiaries are people on lower incomes earning up to $37,000 who
won’t pay tax on their super, women who are out - this applies to men of course
but it mostly applies to women in practise - people who are out of the
workforce for up to five years, they can roll over their concessional entitlements,
concessional contribution caps if you like, and double up on them for five
years to catch up. That’s good for flexibility, particularly good for women.
Older people who currently can’t contribute to super on a concessional basis
after 65 will be able to now, until they’re 75 because obviously many people in
that age bracket continue to work. Independent contractors will be able to
contribute in the same way that employees can. So that’s made it a much fairer,
and more flexible, and sustainable system.[11]
On 15 September 2016, the Treasurer announced
‘improvements’ to the 2016–17 Budget superannuation measures.[12]
Changes to the package included:
- replacing
the $500,000 lifetime non-concessional cap with a reduction in the existing
annual non‑concessional contributions cap from $180,000 per year to
$100,000 per year
- individuals
with a superannuation balance of more than $1.6 million will no longer be
eligible to make non‑concessional (after tax) contributions from 1 July
2017. This limit will be tied and indexed to the transfer balance cap
- not
proceeding with the harmonisation of contribution rules for those aged 65 to 74,
and
- the
commencement date of the proposed catch-up concessional superannuation
contributions will be deferred by 12 months to 1 July 2018.[13]
In the press conference announcing these changes, the
Treasurer responded to questions about the ‘ironclad’ nature of the 2016–17
package of measures, noting:
What I accept is that when you're in Government, you have to
solve problems, you have to work issues and you have to get to conclusions and
that's what we've done today. But importantly, what we took to the Australian
people was to make superannuation fairer, more flexible, to improve its
integrity and to make it more sustainable and make sure it contributes to the
budget task. And we've done all of that. What we've done today is not just to
take a hard issue and drop it and make taxpayers pay for the difference. No. We
have applied a discipline to ourselves in working through this issue fiscally,
which I think should be a model to others. If people want to deal with issues,
and there are other issues we have to deal with as a government, the same rules
will apply. We will make sure what we do washes its face.[14]
Treasury
consultation
The measures that are included in the suite of Bills were part
of a consultation process undertaken by the Treasury over the period September
to October 2016:
- on
7 September 2016, draft legislation and explanatory material was released
relating to the measures for the objective of superannuation, tax deductions
for personal superannuation contributions, improving superannuation balances of
low income spouses, introduction of the LISTO and harmonising contribution
rules for those aged 65-74[15]
- on
27 September 2016, draft legislation and explanatory material was released
relating to the measures for the introduction of the $1.6 million transfer
balance cap, lowering the income threshold to $250,000 for additional tax on
concessional contributions and reducing the concessional contributions cap to
$25,000, allowing catch-up concessional contributions for those with balances
less than $500,000, removing regulatory barriers to innovation in the creation
of retirement income stream products, improving the integrity of transition to
retirement income streams and removing the anti-detriment provision[16]
- on
10 October 2016, draft legislation and explanatory material was released
relating to the measures to lower the annual non-concessional contributions cap
to $100,000 and restrict eligibility to make non‑concessional
contributions to individuals with superannuation balances below $1.6 million.[17]
Emergence
of concerns
Sustainability
Debate about the sustainability of superannuation tax
concessions has emerged from awareness of the cost of superannuation tax
concessions (in terms of revenue foregone) as well as concerns about the impact
of population ageing on the budget.
Value of
superannuation tax concessions
Measured superannuation tax concessions have grown
significantly in recent years. According to Treasury’s most recent annual tax
expenditures statement, the major superannuation tax expenditures—the
concessional taxation of employer contributions and superannuation fund
earnings—were measured to ‘cost’ almost $30 billion in 2015–16 on a
revenue foregone basis.[18]
While there is not universal agreement about how these tax
concessions are calculated,[19]
the expected continued growth in these and other superannuation tax concessions
into the future has nevertheless promoted some policy consideration about
whether such support for superannuation is desirable, particularly in the
context of the Commonwealth’s fiscal position.[20]
Impact of an
ageing population
Concerns about the impact of an ageing population in
Australia have been expressed in the four intergenerational reports published
by Australian Governments since 2002 (2002, 2007, 2010 and 2015). Much of this
concern is based on projections for a deterioration in the budget position, due
mainly to higher health and aged care expenditure, if policies are left
unchanged.[21]
In terms of retirement incomes policy, one area highlighted
in the intergenerational reports has been the continued heavy reliance on the
age pension for income support in retirement, albeit with a shift of more
recipients to a part-pension as the superannuation system matures.[22]
This theme of a continued dependence on the age pension remains a concern to
some policy makers, with the National Commission of Audit noting in 2014:
Despite the increasing shift towards part-rate pensions the
proportion of older Australians eligible for Age Pension is projected to remain
constant at 80 per cent. There is no projected increase in the proportion of
individuals who are completely self-sufficient despite the significant investment
in superannuation over time. This includes the impact of the recent decision to
increase the Superannuation Guarantee rate to 12 per cent by 2019–20.
The reasons for this are multi-faceted, but are likely to
include people deliberately tailoring their affairs to meet current eligibility
criteria such as by consuming assets or transferring equity to the principal
residence or other assets that are not means tested. Current means testing
arrangements mean that people with significant levels of income or assets can
still be eligible for a part-rate pension.[23]
Fairness
Concerns about the ‘fairness’ of superannuation tax
concessions—based primarily around the share of concessions going to higher
income earners—have been raised over recent years.
Rudd/Gillard
Governments
In 2010, the Report to the Treasurer: Australia’s
Future Tax System: (Henry Tax Review) examined the structure of existing
superannuation tax concessions. The review noted:
The structure of the existing tax concessions is inequitable
because high-income earners benefit much more from the superannuation tax
concessions than low-income earners.
Access to concessions should not depend on an employer’s
remuneration policies, such as whether a person can make salary sacrifice
contributions. The age limit on who can make superannuation contributions also
limits access to concessions.
Taxing superannuation contributions reduces the level of
superannuation guarantee contributions invested in the fund. This limits the
adequacy of the superannuation guarantee in providing for retirement incomes in
a way that is inequitable for low-income earners compared with other saving
alternatives.[24]
While the Gillard Government did not act on the Henry Tax Review’s
recommendations in relation to the taxation of superannuation, it did introduce
a number of changes, including the LISC and lower contributions caps, partly to
address issues related to the equity of superannuation tax concessions.
Introducing the Bill to implement the LISC in late 2011, then Assistant
Treasurer, Bill Shorten, noted:
The Gillard government is acting on the recommendation of the
Henry review, which said that superannuation tax concessions should be
distributed more equitably.
...
This will be one of the most significant wealth creation
reforms targeted at low-income earners in modern Australian history. Put
simply, the government is lowering the tax burden on low-income
Australians—people who go to work every day—and directing this forgone tax
revenue into their superannuation accounts to help them build for the future.[25]
Despite these changes, the equity of superannuation tax
concessions remained an issue for the Gillard Government. In early 2012, the
Treasurer Wayne Swan, and Minister for Financial Services and Superannuation
Bill Shorten, announced the establishment of a ‘superannuation roundtable’,
comprised of industry representatives, selected academics and others, ‘to
consider ideas raised at the Tax Forum for providing Australians with more
options in retirement and improving certain superannuation concessions’.[26]
Work undertaken as part of the round table process
provided modelling about the distribution of tax concessions across income
groups, which revealed that in 2009–10, the top five per cent of taxpayers
by taxable income received one-quarter of the value of tax concessions, with
taxpayers with lower incomes receiving a small share of tax concessions (Figure
2).
Figure 2: Estimated distribution of superannuation tax concession 2009–10
Source: The Treasury, Distributional
analysis of superannuation taxation concessions: a paper to the superannuation
roundtable, The Treasury, Canberra, April 2012.
To address these concerns, the Gillard Government
announced changes to superannuation tax arrangements. In the 2012–13 Budget,
the Government announced the introduction of an additional 15 per cent
contributions tax from the 2012–13 financial year for individuals earning above
a $300,000 income threshold.[27]
This measure was legislated by the Tax and
Superannuation Laws Amendment (Increased Concessional Contributions Cap and
Other Measures) Act 2013 and remains in place. In April 2013, the
Gillard Government announced a proposal to cap at $100,000 the tax exemption
for earnings on superannuation assets supporting income streams from 1 July
2014, with a concessional tax rate of 15 per cent applying thereafter.[28]
However, a Bill to put this measure into effect was not introduced into the
Parliament.
Abbott
Government
Following the 2013 election, the Abbott Government
announced in November 2013 that the measure to cap at $100,000 the tax
exemption for earnings on superannuation assets supporting income streams
measure would be dropped.[29]
Momentum to support further changes in superannuation tax
changes was supported in 2014 by the Financial System Inquiry (FSI) (Murray Inquiry).
In the Murray Inquiry’s interim report (July 2014), the relatively high share
of total superannuation tax concessions for higher income earners was examined
and the report noted:
Recent changes to concessional and non-concessional
contribution caps and a higher contributions tax rate for very-high-income
earners (30 per cent above $300,000) have attempted to achieve more equitable
outcomes. Further adjustments to policy settings may be required.[30]
The final report of the Murray Review (released 7 December
2014), presented information on the distribution of total superannuation tax
concessions across income groups, and noted that the majority of tax
concessions accrue to the top 20 per cent of income earners (Figure 3).
While the Murray Review considered two options to better target superannuation
tax concessions—reducing the non-concessional contributions cap and levying
additional earnings tax on superannuation account balances above a certain
limit—the Review did not make specific recommendations and instead considered
that these should be part of the proposed tax review.[31]
The Abbott Government tax review released a discussion
paper on 30 March 2015.[32]
In the discussion paper, the Government noted:
While there are policy grounds for superannuation being taxed
at a lower rate than labour income, there are issues around the distribution of
the impacts and their effectiveness in supporting higher retirement incomes, as
well as their complexity. The Financial System Inquiry made observations
relating to the differential earnings tax rate across the accumulation and
retirement phases, as well as the targeting of superannuation tax concessions.
The Government has indicated these will be considered as part of the Tax White
Paper process.[33]
Figure 3: Share
of total superannuation tax concessions by income decile, 2011–12
Source: Financial System Inquiry,
Financial System Inquiry: final report, The Treasury, Canberra,
November 2014, p. 138.
Following the 2015–16 Budget, which did not include any
superannuation tax measures, the Treasurer Joe Hockey noted:
As everyone in this room would know, there has also been a
lot of talk about superannuation tax concessions. Some believe that the
solution to the nation’s ills is to slug those who are taking responsibility
for their retirement with higher taxes on superannuation.
This government absolutely rejects that view. As we promised
prior to the last election, we will not engage adverse or unexpected changes to
superannuation in our first term of government. Nor do we have plans to
increase superannuation taxes into the future.
...
Stability in tax policy is important, and even more important
where individuals rely on the long term stability of the rules around
retirement savings. What self-funded retirees and part pensioners need now,
more than ever, is stability not more tinkering with the system.[34]
Turnbull
Government
In November 2015, the Turnbull Government signalled that it
was considering changes to superannuation tax concessions. In a speech to the
Association of Superannuation Funds of Australia on 27 November 2015, the
Treasurer Scott Morrison noted:
Retirees have saved for their retirement under the existing
rules across their working lives. The Government acknowledges these efforts and
sacrifices.
And yet we must also balance all that with the goal of
shaping the superannuation system so it provides opportunity to all
Australians. Because until tax concessions and the superannuation system are
perceived to strike the right balance, there’ll continue to be calls for
tinkering and more changes.[35]
Support for changes to superannuation tax concessions was also
continuing to come from other sources, including superannuation industry
groups. For example, in its submission for the 2016–17 Budget in February 2016,
the Association of Superannuation Funds of Australia included several policy
suggestions, such as a $2.5 million balance cap, as well as lifetime
concessional and non-concessional contributions caps as elements of ‘ensuring
equity, adequacy and sustainability in the system’.[36]
Closer to the 2016–17 Budget, John Daley from the Grattan
Institute in March 2016 noted:
The debate about superannuation tax breaks is getting to the
pointy end.
...
Ultimately, where you draw the lines on an “adequate
retirement” and super tax breaks are political questions. But on any view, the
current superannuation tax breaks are much more than needed for an extremely
comfortable retirement.[37]
Key
superannuation figures and information
The superannuation system is an important part of the
Australian economy. Accumulated superannuation balances and contributions form
an important part of an individual’s retirement income savings.
Value of
superannuation savings
As at 30 June 2016, the total value of accumulated
superannuation savings in Australia was around $2.1 billion.[38]
There has been significant growth in total superannuation savings both in terms
of the value of savings and as a share of GDP since the late 1980s (Figure 4).
Figure 4: Accumulated
superannuation savings, June 1988 to June 2016
Source: Parliamentary Library estimates based on Treasury methodology using
data from the Australian Prudential Regulation
Authority (Quarterly superannuation performance, various issues) and Australian Bureau of Statistics
(Australian National Accounts: National Income,
Expenditure and Product, various
issues).
The value of superannuation savings is likely to continue
to increase over the medium to long term, with various estimates putting the
value of assets managed by superannuation funds in the order of $6–9 trillion
in the mid‑2030s.[39]
The
importance of superannuation for household savings
Superannuation assets form an important and growing part of
household wealth. The Australian Bureau of Statistics estimates that superannuation
savings account for around one-third of average household assets, with property
assets (including the value of occupied housing) accounting for more than
55 per cent of household assets.[40]
That said, analysis by the Grattan Institute shows that superannuation assets
held by households are largely held by wealthier households, which also tend to
hold significant wealth outside of the home and superannuation (figure 5).
Figure 5:
Household mean wealth by asset class, by household income decile, 2013–14
($’000)
Source: J Daley, B Coates and H Parsonage, How
households save for retirement, Background paper, Grattan Institute, Melbourne,
October 2016, p. 5.
Individual
superannuation savings and contributions
Data published by the Australian Taxation Office provides
information about the value of contributions to superannuation and the broad
characteristics of individuals who had superannuation contributions in 2013–14.
In broad terms, these data show:
- the
average level of contributions generally increases with age, income and the
value of accrued superannuation balances
- women
on average have lower contributions than men, for all contributions types, and
- personal
contributions form an important part of contributions for those aged more than
50 and those on the highest level of income (Figure 6).
Figure 6:
Average superannuation contributions, by taxable income, age, superannuation
balance, gender and type of contributions, 2013–14 ($)
By taxable income
|
|
By age
|
|
By superannuation balance
|
|
Type of contributions, by gender
|
|
Type of contributions by taxable income
|
|
Type of contributions by age |
|
Source: ATO, ‘Individuals’,
Taxation statistics 2013–14, ATO website, last modified 18 March 2016, ‘Table
24, Superannuation fund contributions, for the 2013–14 financial year, by
superannuation total accounts balance, taxable income and age range’, ‘Table
25, Superannuation fund contributions, 2013–14 financial year, by age range,
gender and taxable income’.
Estimates by the Australian Bureau of Statistics on average superannuation
balances suggest that individuals have been able to accumulate higher
superannuation balances, and that as they near retirement ages, they will
retire with higher balances that a decade ago. That said, average balances for
women remain below those for men (Figure 7).
Figure 7: Mean and median male and female superannuation account balances
for those aged 55–64 years, by gender, 2003–04 and 2013–14 ($’000)
Source: Australian Bureau of Statistics (ABS), Household
Income and Wealth, Australia, 2013–14, cat. no. 6523.0, ‘Superannuation
of persons: table 24.3 Superannuation account balances’, ABS, Canberra, 4 September
2015.
Committee
consideration
Senate
Economics Committee
The Bills have been referred to the Senate Economics
Legislation Committee for inquiry and report by 23 November 2016.[41]
Details of the inquiry are at the Committee’s homepage.[42]
The Committee recommended that the Senate pass the Bill.[43]
Labor members of the Committee issued a dissenting report, outlining
alternative positions on two measures and opposing the introduction of catch-up
concessional contributions and changes to tax deductibility for personal
superannuation contributions, which are regarded as ‘unaffordable given the
current fiscal position’.[44]
While not calling for the Bill to be rejected, Labor stated:
Labor Senators will continue to argue for amendments to the
Government’s legislative package, and if unsuccessful on this occasion, will
take the position to the next election.[45]
Senate
Standing Committee for the Scrutiny of Bills
At the time of writing this Bills Digest, neither of the
Bills had been considered by the Senate Standing Committee for the Scrutiny of
Bills.
Policy
position of non-government parties/independents
Australian
Labor Party
The Australian Labor Party indicated during debate in the
House of Representatives on the Bills that while the ALP would move amendments
to the Bills, it would ‘facilitate’ the passage of the legislation.[46]
The Shadow Treasurer noted:
Let me be very clear: This package is better than it was.
This package is better than nothing. We are glad the government have finally
acknowledged the need for superannuation tax reform. What we will do, in this
debate and in the other place, is make sensible suggestions as to how it can be
improved.
...
If the government refuse, at the end of the day, to accept
those amendments, we will not give the government an excuse to walk away from
this legislation. I will not give this Treasurer an excuse to walk away from
what he has been dragged kicking and screaming to do. We will not let the
perfect be the enemy of the good, and we will facilitate the passage of the
legislation.[47]
2015
announcement
The superannuation policy which the ALP took to the 2016 Federal
election essentially reflected its announcement on 22 April 2015 that it would
limit tax-free earnings on assets supporting income streams to $75,000, after
which a 15 per cent rate would apply and reduce the income threshold at
which the 30 per cent tax rate on concessional contributions applied from
$300,000 to $250,000.[48]
Announcing the policy, the Leader of the Opposition Bill
Shorten and Shadow Treasurer Chris Bowen noted:
A fair and sustainable superannuation system will protect
living standards in retirement and take pressure off the age pension. The
recent Financial System Inquiry found that 10 per cent of Australians currently
receive 38 per cent of all superannuation tax concessions. In particular, the
tax-free status of all superannuation earnings, introduced by the Howard
Government in 2006, disproportionately benefits high income earners and is
unsustainable.
...
We believe these changes are all that are needed to ensure
sustainability at the very top end of our superannuation system. If we are
elected these are the final and the only changes Labor will make to the tax
treatment of superannuation.[49]
Subsequent
August announcement
On 24 August 2016, the ALP announced its position in
relation to the 2016–17 Budget package of measures, noting that that it would
amend the proposal to reduce the income level at which the 30 per cent tax on
contributions applied to $200,000 rather than $250,000 and that it would:
- oppose
allowing catch-up concessional superannuation contributions
- oppose
harmonising contribution rules for those aged 65 to 74, and
- oppose
allowing tax deductions for personal superannuation contributions.[50]
The Shadow Treasurer Chris Bowen and Shadow Minister for Small
Business and Financial Services Katy Gallagher noted:
Since Budget night, Labor has expressed our concern about the
retrospectivity of the Government’s $500,000 lifetime non-concessional
contribution cap. We committed to consult and make changes to it – something
Scott Morrison should have done ahead of the Budget.
At the same time, we committed to delivering at least the
same quantum of Budget improvements as contained in the Government’s overall
superannuation package.
...
Labor’s measured approach to super reform achieves two
important objectives: ensuring that our tax concessions are fit for the task of
helping Australians save for a dignified retirement, and improving the Budget
bottom line.
Our proposed package is fair, affordable and can be delivered
in the Parliament. Malcolm Turnbull simply cannot say the same about his own
superannuation plans.[51]
Subsequent
November announcement
On 8 November 2016, the ALP announced that it would propose
several changes to the Government’s amended package of measures.[52]
The changes included restating some elements of its 24 August 2016 announcement
which remained as part of the Government’s 15 September 2016 amended
package:
- lowering
the annual non-concessional contributions cap to $75,000
- lowering
the High Income Superannuation Contribution threshold to $200,000, and
- not
allowing for catch-up concessional contributions and tax deductibility for
personal superannuation contributions.[53]
In announcing this position, the Shadow Treasurer Chris
Bowen noted:
Labor will finalise its position on the Government’s
legislation when it is eventually presented to the Parliament. But we urge the
Government to accept Labor’s responsible proposals, and work with us to deliver
superannuation reforms which are fairer and better.[54]
Other
parties and independents
Australian
Greens
The 2016 election superannuation policy of the Australian
Greens (the Greens) was to implement a progressive contributions tax
arrangement for concessional contributions, so that contributions would be
taxed at an individual’s marginal tax rate, less 15 per cent.[55]
Under the proposal, there would also be a government co‑contribution of
15 cents for each dollar of superannuation contributions for those earning
an annual income of under $18,200.[56]
The basis for these proposals is largely related to a view that the existing
tax concessions favoured higher income earners, with the Greens noting:
Superannuation tax breaks for the very wealthy are placing an
unfair and unsustainable burden on the Budget. It is time to end the unfair tax
breaks in our super system, support low income earners and raise the revenue we
need to fund schools, hospitals and infrastructure.[57]
Liberal
Democrats
Liberal Democratic Party’s 2016 election policies included
a proposal to expand the current superannuation savings account system to
encompass health, unemployment and disability as well as retirement—and to also
make such accounts tax free with respect to contributions, earnings and
permitted withdrawals.[58]
Following the 27 September 2016 announcement about
changes to the package of measures, Senator Leyonhjelm was critical of the
measures, stating:
The underlying problem is that, while a superannuation
balance of $1.6 million might sound like a lot, it is not enough to retire on
without the age pension. With low interest rates and the increased possibility
of living for at least 30 years in retirement, $1.6 million might only buy an
annuity starting around $50,000, rising with inflation.
...
Unless interest rates increase substantially or we start
dying earlier, a much higher super balance will be needed to ensure permanent
ineligibility for the age pension. If there is no benefit in accumulating a
super balance in excess of $1.6 million, there will be no incentive to become independent
of the age pension.
That means the self-funded retiree will become a distant
memory while the working age population will bear a crushing tax burden to pay
for pensions.[59]
One Nation
Pauline Hanson’s One Nation party did not have a specific
2016 election policy relating to superannuation tax arrangements. However, the
party did propose to allow Australians up to the age of 38 to access their
accumulated superannuation funds to use as a deposit to buy their first home.[60]
Nick
Xenophon Team
The 2016 election superannuation policy of the Nick Xenophon
Team (NXT) included proposals to bring forward the increase in the
superannuation guarantee to 12 per cent, improve transparency and end fee
‘gouging’ and a requirement for funds to hold annual general meetings.[61]
In relation to tax arrangements, the NXT proposal was that ‘[t]ax-breaks for
superannuation must be re-calibrated so the greatest benefit is directed to
those with the least savings, and a reduced benefit is enjoyed by those with
very high superannuation savings’.[62]
Which
elements of the package have bipartisan support?
Based on the statements made by the ALP on elements of the
package of measures included in the Bill, only two of the measures are opposed
by the ALP. Of the remaining measures, the ALP supports five measures, has
proposed amendments to three measures and has not expressed a view on one of
the measures (Figure 8). That said, as noted earlier, the ALP has indicated
that they will ‘facilitate’ the passage of the Bills through the Parliament.[63]
Figure 7:
Comparison of Government and ALP positions on measures included in the Bill
Notes: Green indicates the measure has bipartisan support.
Orange indicates the ALP has proposed amendments to the measure. Red indicates
the ALP opposes the measure. No colour indicates that the ALP has not expressed
a specific view.
Source: Parliamentary Library analysis of Government and ALP policy statements.
Position of
major interest groups
Superannuation
industry groups
The Association of Superannuation Funds of Australia
(ASFA) had mixed views on the measures announced in the 2016–17 Budget,
supporting the introduction of the LISTO but opposing the reduction in
concessional caps to $25,000.[64]
ASFA also noted:
ASFA has long advocated for support for low income earners
contributing to superannuation. The LISTO scheme provides this and makes the
superannuation system stronger.
While ASFA has previously supported a $2.5 million cap on
balances that can be transferred to the tax free retirement phase, the Budget
proposal for a cap of $1.6 million goes much further. A $2.5 million cap will
have an impact on over 50,000 people, and involve additional revenue of under
$500 million a year—while a $1.6 million cap will affect more than 100,000
people and result in additional revenue for the government of $1.15 billion by
2019/20. ASFA will need to do work to understand the impact on retirement
incomes.
...
The changes to the flexibility caps will allow women, in
particular, who currently retire with less than half the superannuation of men,
to catch up. However, the restriction of a five year period for the calculation
of previously unused cap amounts restricts the effectiveness of this.[65]
Following the Government’s 15 September 2016 announcement
of changes to some of the measures, ASFA was supportive of the changes and
‘urges the Parliament to pass the changes as soon as practical, in order to
provide certainty for people saving for their retirement’.[66]
The interim CEO of ASFA noted:
ASFA has long advocated for both a lifetime cap on
non-concessional contributions and a limit on the total amount tax free in
retirement. The revised superannuation proposals address both issues.
The primary role of superannuation is to provide income in
retirement and it should not be used as an estate planning tool.
The ceiling of $1.6 million, once it is legislated, balances
the need to ensure enough income for a comfortable retirement with ensuring the
level of tax concessions is sustainable in the future.
This is the responsible thing to do for the superannuation
system and for Australia’s long term, fiscal sustainability.[67]
After the introduction of the Bills on 9 November
2016, ASFA noted that it had ‘broadly supported the thrust of the government’s
tax package from its announcement because it makes the superannuation system
more sustainable and fair’.[68]
AFSA considered that the Bills ‘should be passed without any undue delay, to
provide certainty and confidence in the system’.[69]
The Financial Services Council (FSC) considered the
2016–17 Budget announcements had both ‘positive’ and ‘restrictive’ elements.[70]
The CEO of the FSC noted:
The test for this budget is whether Australia will have more
pensioners or more self funded retirees.
...
The new caps and thresholds limit the capacity for
Australians to save for their own retirement and will restrict retirees to an
income of around $80 000 per annum from their superannuation. An $80 000 limit
will fail to cover the costs of retirement for many Australians, when you
include healthcare, aged care and a comfortable standard of living.[71]
Following the Government’s 15 September 2016 announcement
of changes to some of the measures, the FSC welcomed the changes to the
non-concessional contribution caps.[72]
The FSC noted:
For those Australians who can afford it, they will now be
able to place $125,000 into super each year until they reach the $1.6 million
cap. This is made up of $25,000 of concessional contributions and $100,000 of
after tax contributions.
The FSC has consistently argued that the proposed backdating
measures would have been difficult to implement and they also conflicted with
the long-term nature of superannuation policy, undermining opportunities for
consumers to prospectively plan for their retirement.
The removal of the $500,000 cap gives Australians who can
afford to save more, increased flexibility to do so and avoids administration
that would have increased costs for superannuation savers.[73]
After the introduction of the Bills on 8 November
2016, the FSC indicated that it was broadly supportive of the measures
announced in the 2016–17 Budget and had ‘welcomed the Government’s consultation
with industry to work through implementation issues to minimise costs to funds
and consumers’.[74]
The CEO of the FSC noted:
Australians want certainty and confidence in superannuation.
They want to be free to choose their own super fund and they want employers to
be able to offer them a choice of funds. More than anything they want political
parties to draw a line in the sand under changes to the tax treatment of super
so they can plan confidently for their financial futures.[75]
The SMSF Association was supportive of the
introduction of the LISTO following the 2016–17 Budget announcement but noted
several measures of ‘concern’ including the lower $25,000 concessional
contribution cap, the $500,000 lifetime non concessional cap, limiting
tax-free earnings to a balance of $1.6 million and lowering the income
threshold to $250,000 for the higher tax on concessional contributions.[76]
The SMSF Association noted:
The Federal Government’s decision to reduce the concessional
contribution cap down to $25,000 is a backward step that will severely reduce
the ability of people to save adequately for retirement.
... this decision, when coupled with other flawed measures in
the Budget, will send shock waves through an SMSF [Self Managed Super Fund] sector
that was hoping the broad parameters of the system had been settled.
... We strongly believe that adequate concessional contribution
caps are vital to allow people to save for a secure and dignified retirement.[77]
Following the introduction of the suite of Bills on
8 November 2016, the SMSF Association considered that SMSF trustees and
their advisers could have greater certainty in beginning to adjust their
superannuation strategies in advance of the proposed 1 July 2017 start date for
most of the proposed changes.[78]
The CEO of the SMSF Association noted:
The changes allowing the carry forward of unused concessional
contribution cap space and allowing all taxpayers to make deductible
contributions to their superannuation are undoubtedly positives for the system.
These changes greatly increase the flexibility for people[‘s] contribution to
super, especially for women who may have had broken work patterns, allowing
greater opportunities to save for retirement.[79]
Immediately following the 2016–17 Budget announcement, Industry
Super Australia (ISA) generally supported the package of measures, which
they considered had ‘rightly wound back’ the ‘overly generous’ superannuation
tax concessions.[80]
The ISA in particular welcomed the decision to introduce the LISTO, noting:
This top up payment, which was due to be abolished in 2017,
is critical in ensuring lower paid workers don’t end up paying more tax on
their super than they do on their take home pay.
... This is a sensible step in the right direction for which
Industry SuperFunds have strenuously advocated. However, with a whopping 45%
gap in super savings between men and women, more will need to be done to
actively boost the super savings of this lower paid group to help them reach a
comfortable retirement standard.[81]
Following the Government’s 15 September 2016
announcement of changes to some of the measures, the ISA expressed its support
for the changes, noting:
We would hope all MPs will now give careful consideration to
these changes so the reforms can start to make their way through the
Parliament. These are evolutionary, not revolutionary changes.[82]
The Australian Institute of Superannuation Trustees
(AIST) responded positively to the 2016–17 Budget announcements, seeing the
measures as a ‘necessary step toward a fairer and more sustainable super system.[83]
Responding to the changes announced by the Government on 15 September
2016, the AIST remained supportive of the overall package, noting:
While AIST is disappointed to see the reversal of rules
affecting older workers aged 65 to 74, on balance these changes are in keeping
with the need to improve the fairness and sustainability of the system ... Furthermore
these changes are considerably easier for funds to implement and do not add to
the complexity of the system.[84]
On the introduction of the suite of Bills into the
Parliament, the AIST ‘urged all Federal Parliamentarians to support tax changes
to superannuation that improve retirement outcomes for low income earners,
including women’.[85]
Professional
bodies
Following the 2016–17 Budget announcements, the Actuaries
Institute welcomed the proposed changes, which in its view would ‘inject
more equity and fairness into the retirement incomes system’.[86]
The Institute noted:
Overall the Budget changes improve the system, making it
fairer while also increasing revenue to assist the economy in these financially
constrained times.
...
The Institute believes these changes will help to meet the
Government’s objective of superannuation, which was adopted from the Financial
System Inquiry – to provide income in retirement to substitute or supplement
the Age Pension.[87]
The Actuaries Institute welcomed the Government’s
15 September 2016 changes, noting:
The proposed changes meet the overall targets for the
superannuation and retirement incomes system of adequacy, equity and
sustainability. Today’s announcement represents a reasonable compromise in
order to allow the package of much needed superannuation tax reforms to
proceed.[88]
The Tax Institute was supportive of the changes
announced in the 2016–17 Budget.[89]
The President of the Institute noted:
The Budget delivered today is a good step in the evolution of
our tax system.
...
The superannuation measures better target tax concessions in
the superannuation system to make the system more equitable without
compromising stability.[90]
Following the 2016–17 Budget announcement, the Chartered
Accountants Australia New Zealand (CAANZ) expressed concerns that the ‘confidence
in the super system has been severely shaken by some of the changes announced
in the Turnbull Government’s budget’.[91]
The CAANZ was supportive of the proposal for a lifetime non-concessional
contributions cap but believed that $500,000 was too low, and that a
higher lifetime limit should apply for those aged at least 50 years of
age.[92]
The CAANZ also considered that the proposed annual concessional cap of
$25,000 was too low.[93]
Thinktanks/research
groups
In a September 2016 paper entitled A
Better Super System: Assessing the 2016 Tax Reforms, the Grattan
Institute considered the different policies presented by the Government in
the 2016–17 Budget and those proposed by the ALP.[94]
The Grattan Institute concluded that the policies were not that different,
noting:
The major parties disagree about relatively little in this
reform debate. The ALP would not count post-tax contributions between 2007 and
the present. On the other hand it would adopt a number of other policies that
would contribute even more to budget repair. Any combination of the packages on
offer would improve the current system overall.
...
The proposed changes to super tax are built on principle,
supported by the electorate, and largely supported by all three main political
parties. If common ground cannot be found in this situation, then our system of
government is irredeemably flawed.
Even after the reforms, super tax breaks will still mostly
flow to high income earners who do not need them. The budgetary costs of super
tax breaks will remain unsustainable in the long term. Further changes to super
tax breaks will be needed in future.[95]
The Institute of Public Affairs (IPA) did not support
the 2016–17 Budget changes, making reference to the Coalition’s 2013 election
superannuation policy and a ‘disdain for anyone who has worked hard, made
sacrifices, and become successful’.[96]
The IPA noted:
The language the government uses to justify its changes
basically implies that anyone with more than $1.6 million in superannuation is
somehow engaged in a rort or a tax dodge. But what the Coalition doesn't
acknowledge is that up until a fortnight ago it was deliberately encouraging to
do exactly what people are now being blamed for. In any case, anyone with $1.6
million in superannuation has most likely spent the majority of their working
life paying nearly half of their income to the government in taxes.
Some of those most worried by what the government has done
are not affected by these changes to superannuation. Those not immediately
targeted by the government in this budget don't know what's going to happen
next. Now that the Coalition has opened the door to blatant and retrospective
changes to superannuation, there's the potential for a future Labor/Greens
government to do what the Coalition is attempting - but only worse.[97]
The Centre for Independent Studies (CIS) was critical
of some aspects of the 2016–17 Budget announcements, considering that the
changes ‘do not address the core problem of pension dependence’.[98]
Robert Carling from the CIS, in a September 2016 article entitled How
should super be taxed?, was critical of efforts to improve the
‘fairness’ of tax concessions, noting:
Fairness is a subjective concept, but what can be said
objectively is that the overall tax/transfer system is highly redistributive
without any further reshaping of superannuation taxes to mirror the progressive
personal income tax. Moreover, there are significant simplification benefits in
flat superannuation taxes. The recent and proposed changes are introducing new
complexities to the system.
Balancing the budget is an important objective but in itself
does not override the principle of concessionality for superannuation. Revenue
constraints will always require limits on access to concessionality, but the
tightening of access proposed by the government is draconian and little
justification has been provided for the details. The government needs to go
back to the drawing board, review its proposals, and produce a green paper for
consultation, including the actuarial basis for revised proposals.[99]
Other
groups
National Seniors Australia (NSA) was supportive of
the 2016–17 Budget changes, but did express some ‘reservations’ about the
reduction in the concessional contribution cap from $35,000 to $25,000.[100]
The CEO of the NSA noted:
The Turnbull Government has taken a measured but fairly
comprehensive approach to superannuation reform ... The mix, in terms of fairness
and sustainability, appears pretty good.
Currently, women are retiring with half the super balances of
men. Initiatives such as allowing the rollover of concessional caps and
widening access to partner contributions may help address this.[101]
Following the 2016–17 Budget announcements, the Council
on the Ageing Australia (COTA) welcomed the changes, which it considered
were ‘the most significant structural reforms since superannuation was introduced’.[102]
The CEO of COTA noted:
COTA is pleased to see the government move in a direction
that ensures superannuation is used for the purpose it was originally intended
- as a way for people to save for their retirement rather than a wealth
accumulation scheme for Australia's highest earners.
...
The changes, many of which COTA has called for over the last
few years, will make superannuation much more sustainable and fit for purpose
for the long term.
...
Overall this is a significant and integrated set of reforms
that better utilises taxpayer funded concessions for genuine retirement income
support.[103]
The Australian Council of Social Services (ACOSS)
welcomed the 2016–17 Budget superannuation measures, considering they would ‘take
us in the right direction, tackling unfair concessions for people on higher
incomes, and providing assistance to people who struggle to secure adequate
retirement savings’ but also that ‘the tax treatment of super remains biased
towards higher income earners, and the door for future reform must remain open’.[104]
Responding to the Government’s 15 September 2016
announced changes to the package of measures, ACOSS welcomed the reduction in
the non-concessional cap to $100,000, but criticised the continuation of the
three-year bring forward rule and the retention of the carry-forward measure of
unused concessional contributions.[105]
Financial
implications
The Explanatory Memorandum notes that the measures to be
implemented by the Bills are estimated to increase the underlying cash balance
by $2.8 billion over the four years to 2019–20 (Table 1).[106]
Table 1: Financial
impact of measures included in the Bills, underlying cash basis, 2016–17 to
2019–20 ($ million)
Measure |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
Total |
$1.6 million transfer balance cap |
-4.4 |
500.0 |
650.0 |
700.0 |
1,845.6 |
Concessional superannuation contributions
and lowering
threshold for high income
earners additional contributions tax |
-2.8 |
499.1 |
797.8 |
1,048.9 |
2,343.0 |
Annual non-concessional contributions |
.. |
.. |
50.0 |
150.0 |
200.0 |
Low income superannuation tax offset |
- |
-2.8 |
-651.1 |
-801.1 |
-1,455.0 |
Deducting personal contributions |
- |
350.0 |
-500.0 |
-700.0 |
-850.0 |
Unused concessional cap carry forward |
- |
- |
- |
-100.0 |
-100.0 |
Tax offsets for spouse contributions |
- |
- |
-5.0 |
-5.0 |
-10.0 |
Innovative income streams and integrity |
.. |
130.0 |
160.0 |
180.0 |
470.0 |
Anti-detriment provisions |
- |
- |
105.0 |
245.0 |
350.0 |
Administration and consequential amendments |
- |
* |
* |
* |
* |
Total |
-7.2 |
1,476.3 |
606.7 |
717.8 |
2,793.6 |
*These changes are assessed as having an unquantifiable but small
impact.
Source: Explanatory
Memorandum, Superannuation (Objective) Bill 2016 [and] Treasury Laws
Amendment (Fair and Sustainable Superannuation) Bill 2016 [and] Superannuation
(Excess Transfer Balance Tax) Imposition Bill 2016, pp. 9–10.
As noted previously, the package of measures included in
the Bills is different in several ways to that announced in the 2016–17 Budget:
- the
measure allowing for the carry forward of unused concessional contributions cap
amounts commences one year later, from July 2019, rather than from July 2018
- a
measure to provide for a lifetime non-concessional contributions cap of
$500,000, backdated to 1 July 2017, is no longer part of the overall
package—this has been replaced with the measure for lower annual
non-concessional cap of $100,000, for those with a superannuation balance of
$1.6 million or less
- a
measure to harmonise contribution rules for those aged 65 to 74 has been
dropped.
With the financial impact of the 2016–17 Budget measures
presented in the budget papers on an accrual basis, and those in the
Explanatory Memorandum presented on a cash basis, it is difficult to directly
compare the financial impact between the 2016–17 Budget package of measures and
those included in the Bills.
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed
the Bills’ compatibility with the human rights and freedoms recognised or
declared in the international instruments listed in section 3 of that Act. The
Government considers that the Bills are compatible.[107]
Parliamentary Joint Committee on Human Rights
In its report on 22 November 2016, the Parliamentary
Joint Committee on Human Rights noted that the Bills did not raise human rights
concerns.[108]
Key issues
and provisions
This section provides an overview of each Schedule to the
main Bill and highlights some issues that may be of interest in debate about
the Bills.
How many
people are affected by the proposed changes?
When the measures were announced at the 2016–17 Budget the
Government emphasised that a relatively small number of people that would be
negatively affected by some of the proposals. In his Budget speech, the
Treasurer noted that the implementation of the transfer balance cap, lifetime
non-concessional cap and the 30 per cent contributions tax for those on high
incomes will each affect less than one per cent of superannuation fund members
and the reduction in the concessional contributions cap to $25,000 would affect
three per cent of fund members.[109]
Information prepared at the time of the Budget and later to the Senate
Economics Legislation Committee also gave estimates of how many people would be
impacted by the 2016–17 Budget proposals.[110]
In addition to information provided by the Government, the
Association of Superannuation Funds of Australia and the Grattan Institute have
also provided estimates for the number of people affected by some measures. In
some cases, the Government provided two estimates for the same measure (Table
2).
Table 2:
Estimates of the number of people affected by the 2016–17 Budget superannuation
measures as amended in September 2016
Measure |
Government |
Association of Superannuation Funds of Australia |
Grattan Institute |
$1.6 million transfer balance cap |
Less than 160,000 (a) |
110,000 |
60,000 |
$25,000 concessional contributions cap and lowering
threshold to $250,000 for high income earners additional 15% contributions
tax |
Around 560,000 (a)
Less than 1 per cent fund members (additional contributions
tax) |
Up to 500,000 (many
of these affected by both) |
550,000 |
$100,000 cap on non-concessional contributions |
Less than 160,000 (a) |
|
|
Low income superannuation tax offset |
3.3 million (2/3 of whom are women) and
3.1 million |
3,200,000 |
|
Deducting personal contributions |
800,000 and 850,000 |
850,000 |
|
Unused concessional cap carry forward |
220,000 and 230,000 |
230,000 |
|
Tax offsets for spouse contributions |
5,000 |
5,000 |
|
Remove tax exempt status of income from assets supporting
transition to retirement [TTR] income streams |
110,000 |
550,000 plus (b) |
115,000 |
Anti-detriment provisions |
|
20,000 (annual) |
20,000 |
Notes: (a) Estimated by the Parliamentary Library based on
numbers cited by the Government and a total number of superannuation account
holders of 16 million (b) ASFA noted some individuals may have more than
one TTR account, and some TTR account holders might be able to satisfy a
condition of release for a normal superannuation account based income stream.
Source: S Morrison, ‘Second
reading: Appropriation Bill (No. 1) 2016–2017’, House of Representatives, Debates,
3 May 2016, p. 4255; The Treasury, Making
a fairer and more sustainable superannuation system, Budget 2016: superannuation
fact sheets, The Treasury, Canberra, May 2016; Senate Economics Legislation
Committee, Official
committee Hansard, (proof), 19 October 2016, p. 101; The Treasury,
‘Superannuation
reforms’, The Treasury website; Association of Superannuation Funds of
Australia, Individuals
affected by superannuation budget measures, media release, 2 June
2016; J Daley, B Coates and W Young, A
better super system: assessing the 2016 tax reforms, Working paper, 1,
2016, Grattan Institute, Carlton, September 2016.
Schedule
1—Transfer balance cap
Commencement
The amendments in Schedule 1 to the main Bill commence on
the first 1 January, 1 April, 1 July or 1 October to occur after Royal Assent.
Key
provisions
Schedule 1 of the main Bill amends various tax and
superannuation laws to implement a system to limit the amount of capital
individuals can transfer to the retirement phase to support superannuation
income streams. This in turn, limits the amount of superannuation fund earnings
that are exempt from taxation.[111]
Under this system tax-free investment earnings on superannuation will be limited
to earnings in a ‘transfer balance account’ which is capped at $1.6 million.
The measure is to take effect from 1 July 2017.
Is a
$1.6 million cap too high, too low, or about right?
Item 4 of the Schedule 1 to the main Bill inserts proposed
Division 294 —Transfer balance cap into the ITAA 1997. It operates
to:
- place
a cap on the total amount a person can transfer into the retirement phase of
their superannuation
- where
the balance of the account exceeds the cap, an individual will be required to
remove the excess from the retirement phase and to pay excess transfer balance
tax.[112]
Within the new Division, proposed section 294–35 specifies
that the transfer balance cap for 2017–18 is $1.6 million. The
$1.6 million transfer balance cap will be subject to indexation
arrangements in proposed section 960–285,[113]
which indexes the $1.6 million amount for 2017–18 (in
$100,000 increments) to changes in the all groups consumer price index
from the quarter ending 31 December 2016, as measured by the Australian
Bureau of Statistics.[114]
In his second reading speech, the Treasurer, Scott Morrison
noted that an amount of $1.6 million was ‘around twice the level at which
access to the Age Pension ceases on account of an individual’s assets’.[115]
For an individual retiring at age 65, an amount of
$1.6 million would provide an annual indexed income, under certain
assumptions including an annual return of five per cent, of around $90,000
until age 87.[116]
Those groups supporting a higher cap include the Association
of Superannuation Funds of Australia Association. In its submission to the tax
white paper in June 2015, ASFA supported a higher limit of $2.5 million
and based this amount on several criteria including that this would support an
income stream of around $120,000 per year for a person into their 90’s and
was close to twice the ‘comfortable’ retirement standard as measured by ASFA.[117]
Arguments for a cap higher than $1.6 million also noted that should
returns be lower, such a balance would support a lower income stream and the
potential impact of any financial crisis event that could significantly reduce
the balance in such an account.[118]
Those supporting a lower cap include the Grattan Institute.
While acknowledging that the proposed $1.6 million cap was a ‘positive
step’, the Grattan Institute considered that all earnings in the retirement
phase should be taxed at 15 per cent, noting:
Allowing retirees to amass four times the amount needed for a
comfortable retirement and not pay a cent of tax is unacceptable. Even people
affected by the cap will pay very little extra tax compared to their total
income. Imposing a 15 per cent tax on all superannuation earnings in retirement
would have little impact on retirement incomes ... A 15 per cent tax on all super
earnings would improve budget balances by $2.7 billion a year today, and much
more in future.[119]
The level of the transfer balance cap is important as
several other elements of the changes proposed in the Bill make reference to
this amount (Box 1).
Box
1: Use of the $1.6 million transfer balance cap in regulating other
arrangements included in the Bill
The
‘general transfer balance cap’ established in Schedule 1 of the main Bill is
used in several other areas of the Bill to limit or modify other arrangements
including:
- no non-concessional contributions able to be made once this level
of superannuation balance is reached[120]
-
no government co-contribution available once this level of
superannuation balance is reached[121]
-
no entitlement to the spouse tax offset.[122]
|
Application
to defined benefit fund members
Under existing arrangements, members of certain defined
benefit funds do not generally receive their superannuation pension benefits
tax-free after age 60, instead paying tax at marginal rates, less a 10 per
cent tax offset.[123]
As part of the 2016 Budget measure for the $1.6 million
cap, the Government announced that ‘commensurate treatment for members of
defined benefit schemes will be achieved through changes in the tax
arrangements for pension amounts over $100,000 from 1 July 2017’.[124]
Item 32 of Schedule 1 to the main Bill inserts proposed
Division 303 into the ITAA 1997 to provide arrangements that apply
additional taxation to certain defined benefit income streams. Under these
arrangements:
- a
‘defined benefit income cap’ of 1/16th the value of the general transfer
balance cap is specified[125]
(this is therefore $100,000 for 2017–18 based on a transfer balance cap of
$1.6 million)
- 50 per
cent of any amount above this defined benefit income cap would be included in
an individual’s assessable income and would not be eligible for the 10 per
cent tax offset.[126]
The Explanatory Memorandum notes that the choice of a
$100,000 threshold to apply this tax rate is based on providing ‘broadly
commensurate’ tax outcomes compared to accumulation arrangements, whereby:
The net present value of the additional lifetime tax paid by
high balance accumulation members is estimated to be comparable to the net
present value of the additional lifetime tax paid on unfunded defined benefit
income over $100,000 per annum.[127]
Certain
factors given special treatment in relation to the $1.6 million cap
The proposed $1.6 million transfer balance cap includes
several specific modifications to take account of certain types of events that
may lead to exceptions being made to monies paid into or out of a transfer
balance account. These include:
- structured
settlement contributions such as from a personal injury payment or lump sum
workers compensation payment that are moved into the superannuation environment
are excluded from the $1.6 million cap,[128]
and
- certain
events that result in reduced superannuation (namely losses due to fraud and
void transactions under the Bankruptcy Act 1966) and family law payment
splits whereby superannuation interests are split following a divorce or
relationship breakdown do not count towards the $1.6 million cap.[129]
Schedule
2—Concessional superannuation contributions and income threshold for the
imposition of an additional 15 per cent contributions tax
Commencement
The amendments in Schedule 2 to the main Bill commence on
the first 1 January, 1 April, 1 July or 1 October to occur after Royal Assent.
Key
provisions
Schedule 2 amends the ITAA 1997, Income Tax
(Transitional Provisions) Act 1997, and the Taxation
Administration Act 1953 (TAA) to:
- specify
the concessional contributions cap to be $25,000 for the
2017–18 financial year and provide for indexation arrangements to increase the
cap in $5,000 increments[130]
- lower
the income threshold for the imposition of an additional 15 per cent
contributions tax from $300,000 to $250,000[131]
- specify
an amount for the maximum contribution base under the superannuation
guarantee—effectively the maximum wages and salary that the quarterly employer
contribution is based on—so that mandatory employer contributions cannot by
themselves result in employees having excess concessional contributions.[132]
The Government intends for these measures to take effect
from 1 July 2017.
Concessional
contributions cap
The level of the concessional contributions cap has been
subject to a number of changes over recent years, including changes to the age
at which a person may have had access to a higher age-based cap. The proposed
reduction to $25,000 irrespective of age would see a return to the level
that applied in most years over the past decade (Figure 9).
Figure 8: Concessional contributions cap, 2007–18 to 2017–18
Source: ATO, ‘Key
superannuation rates and thresholds: Concessional contributions cap’, ATO
website, last modified 7 September 2016.
In broad terms, the argument in favour of a higher cap, or
a higher cap for older persons is largely based on the view that higher caps
for people as they approach retirement provide an opportunity to contribute
more to superannuation, at a time when they more likely to have the available
resources to do so.[133]
Those arguing for a higher general cap, or a higher cap
for older persons include the Australian Institute of Superannuation Trustees
and the SMSF Association.[134]
The SMSF Association noted after the 2016–17 Budget announcement:
The Federal Government’s decision to reduce the concessional
contribution cap down to $25,000 is a backward step that will severely reduce
the ability of people to save adequately for retirement.
...
We strongly believe that adequate concessional contribution
caps are vital to allow people to save for a secure and dignified retirement.
It is especially important that people approaching retirement have adequate
contribution caps to maximise contributions to superannuation when they are
most likely to have the financial resources to do so.[135]
Advocates for a lower annual concessional cap include the
Grattan Institute, which argues for an $11,000 cap on concessional
contributions.[136]
In making the case for this lower cap, the Grattan Institute notes:
The tax breaks on contributions disproportionately benefit
high income earners: they save more tax per dollar contributed, and they
contribute more dollars. Voluntary pre-tax contributions over $10,000 in a year
are mostly about tax planning rather than adding to net savings. Those
contributing more than $10,000 a year are predominantly high-income men aged
over 50.
As a result, the tax breaks for contributions of more than
$10,000 a year primarily benefit those who would have self-funded their
retirement anyway. Indeed, around 24 per cent of voluntary pretax contributions
are made by those aged over 60, entitled to withdraw their contributions
immediately.
The best way to reform these tax breaks would be to limit
concessional contributions to a maximum of $11,000 per year. This change would
target superannuation tax breaks to those who need them to reduce and replace
their Age Pension. It would be relatively easy to implement, and would improve
the budget bottom line by around $3.5 billion a year.[137]
Lower the
income threshold for the imposition of an additional 15 per cent
contributions tax from $300,000 to $250,000
The additional 15 per cent tax on concessional
contributions for those above a $300,000 income threshold was announced by
the Rudd Government in the 2012–13 Budget.[138]
The introduction of the measure was largely based on equity grounds, with the
measure aimed at making ‘the superannuation system fairer by reducing the tax
concession which very high income earners receive on their concessional
contributions, so it is more in line with the concession received by average
income earners’.[139]
At the time the originating Bill to introduce the measure
was being considered, the Coalition did not oppose it, but based this approach
on the budget position at the time, with then Shadow Parliamentary Secretary
for Tax Reform, Tony Smith noting:
These Bills contain a tax increase on superannuation that the
Coalition would not wish to see in place, but due to years of mismanagement we
have been left with little choice.
...
This tax provides a gain to the budget of $1.747 billion over
the forward estimates. Whilst the Coalition would in normal circumstances be
opposed to yet another tax increase by Labor, as the Leader of the Opposition
outlined in his budget reply speech, given the state of the budget the
coalition will not oppose this schedule.[140]
The income threshold for the measure, currently $300,000,
uses an income definition based on that used for Medicare levy surcharge
purposes, less reportable superannuation contributions.[141]
This is a broader income definition than taxable income, including amounts such
as reportable fringe benefits amounts and total net investment losses.[142]
Having been in place since 1 July 2012, the number of tax assessments issued in
relation to the additional 15 per cent tax has increased each year, with the
value of tax assessments issued in 2015–16 exceeding $500 million at an
average value of around $3,600 (Table 3).
Table 3:
Tax assessments for taxpayers liable for the additional 15 per cent tax on
concessional contributions, 2013–14 to 2015–16
|
2013–14 |
2014–15 |
2015–16 |
No. of tax assessments issued |
96,900 |
118,500 |
137,673 |
Value of tax assessment issued ($ million) |
$294 |
$378.9 |
$504.1 |
Average value of assessments |
$3,034 |
$3,197 |
$3,662 |
Source: Commissioner of Taxation, Annual
report 2015–16, vol. 1., ATO, Canberra, p. 133.
As noted previously, the ALP has proposed to lower the
threshold further to $200,000, which it states would apply to less than four
per cent of taxpayers and provide additional revenue of $688 million in
the four years to 2019–20.[143]
Schedule
3—Non-concessional contributions
Commencement
The amendments in Schedule 3 to the main Bill commence on
the first 1 January, 1 April, 1 July or 1 October to occur after Royal Assent.
Key
provisions
Schedule 3 to the main Bill amends the ITAA 1997 to
provide:
- the
annual non-concessional contributions cap will be four times the annual
concessional contributions cap from the 2017–18 financial year[144]
- if
a person has a superannuation balance that exceeds the general transfer balance
cap (proposed to be $1.6 million for 2017–18) then the non-concessional
cap is taken to be nil
- indexation
arrangements will allow the cap to be increased in $2,500 increments with
changes in average weekly ordinary times earnings as measured by the Australian
Bureau of Statistics
- arrangements
relating to the existing three-year carry forward rule for individuals aged
under 65 at any time during that financial year are changed so that the
carry forward period and amounts depend on the difference between the value of
their total superannuation balance and the general transfer balance cap and the
value of the annual non-concessional cap
- eligibility
for the government co-contribution is limited so that individuals are not
eligible for the co‑contribution if their non-concessional contributions
exceed their non-concessional contributions cap or if at 30 June of the
previous year their total superannuation balance exceeded the general transfer
balance cap, and
- transitional
arrangements for those whose three year carry forward period includes the
2017–18 financial year and the change from the existing arrangements which have
a higher non-concessional cap.
The Government intends these measures to take effect from
1 July 2017.
Under existing arrangements the non-concessional contributions
cap is set at six times the value of the general concessional contributions
cap, with the cap therefore being $180,000 in 2016–17.[145]
When implemented in 2007–08, the non-concessional contributions cap was
$150,000, and remained at this level up until 2014–15, when it increased to the
present level of $180,000.[146]
People aged under 65 years may be able to make non-concessional contributions
of up to three times their non-concessional contributions cap for the year,
over a three-year period.[147]
This is known as the ‘bring-forward’ option and would allow, for example, an
eligible person to bring forward contributions of 3 x $180,000 =
$540,000 for 2016–17.
The proposal for a $100,000 annual non-concessional
contributions cap was part of the Government’s 15 September 2016 amended
package of measures, effectively replacing the measure for a
$500,000 lifetime cap on non-concessional contributions, which would have
applied from 1 July 2007.[148]
As previously noted, the ALP has proposed lowering the
annual non-concessional contributions cap further, to $75,000.[149]
Schedule
4—Low income superannuation tax offset
Commencement
The provisions of Schedule 4 to the main Bill commence on
2 July 2017.
Key
provisions
Schedule 4 to the main Bill amends the Superannuation
(Government Co-contribution for Low Income Earners) Act 2003 to provide
for the payment of the low income superannuation tax offset (LISTO) to a
person’s superannuation fund if their adjusted taxable income is
$37,000 or less, from the 2017–18 income year. The payment is to be
calculated at 15 per cent of the total eligible concessional contributions
up to a maximum of $500.
The LISTO effectively replaces the low income superannuation
contribution (LISC), which made a payment of up to $500 to a person’s
superannuation fund based on the same maximum income threshold. The policy
rationale for both the LISTO and LISC was that the reimbursed amount returns
the 15 per cent tax paid on concessional contributions so that an eligible
person does not pay any more tax on these contributions than they would have
paid had they received the money as salary or wages and paid tax in their own
hands.
The provisions in Schedule 4 largely replicate the
existing arrangements for the LISC in the Superannuation (Government
Co-contribution for Low Income Earners) Act 2003, which will be repealed
from the Act from 1 July 2017 by Schedule 7 of the Minerals Resource
Rent Tax Repeal and Other Measures Act 2014. The key difference is the
replacement of the term ‘contribution’ with the term ‘tax offset’. In
legislating for the repeal of the LISC in 2013 and 2014, the Coalition did not
oppose the purpose of the LISC, but rather focussed on the lack of revenue
raised by the minerals resource rent tax (MRRT)—which it argued was introduced
to partly pay for this measure.[150]
Introducing the first Bill to repeal the MRRT in 2013 (which would also have
repealed the LISC from 1 July 2013), the Treasurer Joe Hockey noted:
When we are responsibly able to and once the budget has been
returned to a strong surplus the Coalition will revisit the concessional
contribution caps and incentives for lower income earners. The removal of [the
LISC], which is going to be funded by borrowed money and is unsustainable in
its form, will save the budget $2.7 billion over the forward estimates.[151]
In the financial year 2015–16, the Australian Taxation
Office identified more than 3.14 million beneficiaries for the LISC, with
payments totalling almost $800 million (average payment of $254).[152]
The introduction of the LISTO has broad support across the
superannuation industry. For example, the AIST noted when the Bills were
introduced into the Parliament:
[O]f the super tax changes in the legislation introduced into
Parliament yesterday, the Low Income Super Tax Offset (LISTO) is the most
critical, impacting on more than 3 million Australians, or about 20% of fund
members.
Without support for this measure, more than three million low
income Australians, of which nearly two thirds are women, will be paying more
tax on their super than their take home pay from next July ... The LISTO is an
equity measure that is fundamental to the integrity of the super system and it
is therefore essential that this measure is legislated and not caught up in the
political crossfire.
...
While important and welcome, the other tax measures are less
significant in terms of their impact on individual Australians than the LISTO,
which will boost the super of low income earners by up to $500 a year ... Based
on Treasury estimates, the impact of the LISTO on fund members is nearly 20
times that of nearly all the other tax measures.[153]
Schedule
5—Deducting personal contributions
Commencement
The amendments in Schedule 5 to the main Bill commence on
the first 1 January, 1 April, 1 July or 1 October to occur after Royal Assent.
Key
provisions
Schedule 5 of Bill amends the ITAA 1997 to remove an
existing arrangement in subsection 280–10(1) of that Act that does not allow
individuals to deduct personal superannuation contributions if 10 per cent
or more of their income is attributable to employment or similar activities.
The Government intends the measure to take effect from 1 July 2017.
This so-called ‘10% rule’ was first introduced in 1992 by
the Taxation
Laws Amendment (No. 2) Act 1992. However, the Explanatory Memorandum
that accompanied the legislation did not provide an explanation about why a
10 per cent figure was chosen, nor was it referred to by the Minister in
his second reading speech for the Bill.[154]
The abolition of the 10 per cent rule has been advocated by
a number of interest groups over recent years. For example, in their 2015–16
pre-budget submission, Chartered Accountants Australia New Zealand recommended
removing the rule, noting:
The current "10% rule" means that only taxpayers
who earn less than 10% of their assessable income from an employer source can
claim a tax deduction for personal superannuation contributions. Access to this
deduction is actually only available to relatively few people, generally those
who are fully selfemployed as sole traders.
Many employers currently allow their employees to salary
sacrifice additional superannuation contributions, effectively overcoming the
inability of their employees to claim their own deduction. By forgoing salary
and wages to contribute (or have contributed for them) tax effective
superannuation contributions up to the concessional contribution cap, they have
overcome any need for directly claiming a deduction for otherwise personal
contributions.
Effectively this means employees whose employers do not allow
them to salary sacrifice are disadvantaged. Australians trying to save for
their retirement should not be deprived of superannuation concessions by
working for an employer who does not allow them to salary sacrifice into superannuation.
In our view, it would be more equitable and efficient to permit employees to
make personal concessional contributions in order to "top up" their
employer contributions.[155]
It is also noteworthy that in its 2010 election policy, the
ALP also supported the removal of the 10 per cent rule, noting in August 2010:
The self-employed require appropriate incentives and
opportunity to adequately save for their retirement. The arbitrary ’10 per
cent’ rule for the tax deductibility of superannuation contributions must be
removed to ensure the opportunity is available and all workers have equal
access to the superannuation concessions available.
Deductibility for personal contributions to superannuation
primarily assists individuals who are substantially or wholly self-employed or
who are not gainfully employed. The deduction is allowed in recognition of the
fact that these groups do not benefit, or benefit only to a limited extent,
from the Superannuation Guarantee.[156]
Schedule
6—Unused concessional cap carry forward
Commencement
The amendments in Schedule 6 to the main Bill commence on
the first 1 January, 1 April, 1 July or 1 October to occur after Royal Assent.
Key
provisions
Schedule 6 of the Bill amends the ITAA 1997 to
implement arrangements whereby amounts that are unused from the concessional
contributions cap from the previous five financial years can be carried
forward, subject to the person’s total superannuation balance being
$500,000 or less.[157]
These arrangements are to commence from the 2019–20 financial year, thereby
incorporating any unused concessional contributions from the 2018–19 financial
year onwards.
The concessional contributions carry forward arrangements
have been promoted by the Government as ‘giving Australians the flexibility to
make catch-up concessional contributions when they can afford it’.[158]
Prior to the 2016–17 Budget announcement, the SMSF
Association supported a carry forward approach for concessional contributions:
The current system delivers a poor result for people with
volatile incomes – those with broken work patterns, especially women, small
business owners or farmers whose income can fluctuate widely. These people may
be able to make significant contributions to superannuation in some years but
not others.
In addition, younger people who are unable to make
contributions above compulsory superannuation contributions earlier in life due
to financial commitments, such as mortgages and raising families, will have an
opportunity to increase their contributions later in life.
Contrary to what many believe, a carry-forward approach is a
more equitable and sustainable approach for the superannuation system in
preference to a lifetime contribution cap approach.[159]
As noted previously, the ALP opposes this measure.[160]
Schedule
7—Tax offsets for spouse contributions
Commencement
The amendments in Schedule 7 to the main Bill commence on
the first 1 January, 1 April, 1 July or 1 October to occur after Royal Assent.
Key
provisions
Schedule 7 of the Bill amends the ITAA 1997 so that
the income threshold for an existing tax offset—which allows an individual to
claim a tax offset of up to $540 per year for superannuation contributions
made on behalf of their spouse if the spouse’s income is less than $13,800—
will be increased to $40,000 from the 2017–18 financial year.[161]
A further amendment will remove the ability to claim a tax offset if the
spouse’s total superannuation balance before the start of the relevant year
exceeds the general transfer balance cap ($1.6 million in 2017–18) or if
the spouse’s non-concessional contributions for the year exceed their
non-concessional contributions cap for the year.
Eligibility to claim the tax offset for a spouse
superannuation contribution is set out in section 290–230 of the ITAA 1997.
The income threshold of $13,800 incorporates a definition of income that
comprises assessable income plus reportable fringe benefits total and
reportable employer superannuation contributions. The value of the offset is
limited by section 290–235 of the ITAA 1997, which specifies a maximum
rebate of $540 with the calculated amounts below this to be a rebate of
18 per cent of the lesser amount of:
- $3,000 less
the amount by which the total spouse income (which for eligibility is $13,800)
exceeds $10,800 or
- the
sum of the spouse contributions made by the individual.
A tax offset for spouse contributions was introduced from
the 1998–99 financial year by Schedule 10 of the Taxation Laws
Amendment Bill (No. 3) 1997, which incorporated an income threshold of
$13,800 and a maximum rebate of $540. According to the revised Explanatory
Memorandum for the relevant Bill, the introduction of the measure was announced
in the 1996–97 Budget.[162]
The introduction of the measure reflected a Coalition 1996 election commitment
relating to improving superannuation for women.[163]
Tax statistics collected by the ATO show that in 2013–14,
around 12,000 taxpayers claimed the tax offset, with the average offset
claimed being $414.[164]
The number of taxpayers claiming the offset has declined from a highpoint of
around 35,000 in the mid–2000s. The Treasurer noted in his second reading
speech for the main Bill that the change ‘will encourage an additional
5,000 people to make contributions to the superannuation accounts of their
low income partners, who are disproportionately women’.[165]
Schedule
8—Innovative income streams and integrity
Commencement
The amendments in Schedule 8 to the main Bill commence on
the first 1 January, 1 April, 1 July or 1 October to occur after Royal Assent.
Key
provisions
Schedule 8 amends the ITAA 1997 to:
- remove
the earnings tax exemption in respect to transition to retirement income
streams (TRISs—also sometimes referred to as TRIPs)
- extend
the earnings tax exemption to new ‘lifetime’ products such as deferred products
and group self-annuities, and
- provide
for the use of the so-called ‘proportioning method’ by SMSFs and small APRA
funds rather than the ‘segregated method’ to determine their earnings tax
exemption for an income year if a person has a total superannuation balance
that exceeds $1.6 million.
Remove the
earnings tax exemption in respect to transition to retirement income streams
Under the transition to retirement scheme, if a person has
reached their superannuation preservation age, they may be able to continue to
work and draw a superannuation income stream, subject to certain conditions.[166]
In terms of taxation arrangements, a key feature of TRIS arrangements is that
earnings on assets supporting the income stream are exempt from tax.
The transition to retirement arrangements were first
announced in February 2004 as part of the Howard Government’s broader agenda to
respond to demographic ageing.[167]
In announcing the arrangements, the Government noted at the time:
As the population ages, the need for people to retain a
connection with the workforce will become increasingly important. The skills
and experience of older Australians will make them valuable employees with much
to contribute. In recognition of this, people who have not retired will be able
to access their superannuation as a non-commutable income stream once they
reach their superannuation preservation age.
This measure will provide people with more flexibility in
developing strategies in their transition to retirement. For example, a person
might choose to continue to work with their employer on a part-time basis, and
use part of their superannuation to supplement their income instead of leaving
the workforce altogether.[168]
The TRIS arrangements commenced from 1 July 2005, with the
policy changes implemented by amendments to the Superannuation Industry
(Supervision) Regulations.[169]
These changes provided for the new limited condition of release for benefits
held in a superannuation fund to accommodate the TRIS arrangements and provided
for a maximum 10 per cent of the account balance to be drawn down,
depending on the pension product and member’s age.
On the tax side of TRIS arrangements, it is important to
note that TRIS arrangements came into effect prior to the ‘simplified super’
taxation changes implemented by Treasurer Costello from 1 July 2007 which
provided for tax-free super (benefits and earnings) from age 60.
‘Integrity’ concerns about the TRIS arrangements are based
on a view that the arrangements are not genuinely being used to reduce working
hours and transition into retirement, instead allowing individuals to
salary-sacrifice contributions at the concessional rate of 15 per cent while
employers still pay the compulsory superannuation guarantee.[170]
In a July 2015 paper, the Productivity Commission noted some of these concerns:
However, [TRIS] arrangements can also be used by individuals
to remain working full-time, receive the income from the pension (at a
concessional rate, especially after the age of 60) and make salary sacrifice
from their wage income to maintain their superannuation balances. Put more
simply, wage income, which may be taxed at a higher rate, is salary sacrificed
at a concessional rate in exchange for income from the superannuation balance
which is taxed at a lower rate than wages. This can be used by some to reduce
their tax liabilities while maintaining the same level of income.[171]
Extend the
earnings tax exemption to new ‘lifetime’ products
Schedule 8 of the main Bill also includes amendments to
provide for a broader suite of retirement income products to qualify for the
earnings tax exemption, including those that provide a deferred income stream.
In making these changes, the Government has implemented
concerns raised in a number of reviews and reports, including the Henry Tax Review
(2009–2010), the Financial System Inquiry and the Productivity Commission,
about the ‘longevity risks’ associated with an ageing population.[172]
In brief, the longevity risk—the risk of outliving savings in retirement—may be
mitigated by allowing for a broader set of financial products, such as deferred
lifetime annuities.
In April 2013, the Gillard Government announced a policy
that would encourage the take-up of deferred lifetime annuities, by providing
these products with the same concessional tax treatment that superannuation
assets supporting income streams receive.[173]
However, this measure was not implemented prior to the September 2013
election.
Following the election, the Abbott Government announced that
it would not implement the measures, instead considering the proposal as part
of the review of the regulatory arrangements for retirement income streams.[174]
A discussion paper for this review was released in July 2014.[175]
A Government response was released on 3 May 2016, coinciding with the
2016–17 Budget.[176]
Schedule
9—Anti-detriment provisions
Commencement
The amendments in Schedule 9 to the main Bill commence on
the first 1 January, 1 April, 1 July or 1 October to occur after Royal Assent.
Key
provisions
Schedule 9 of the main Bill amends the ITAA 1997 and
the Income Tax (Transitional Provisions) Act 1997 to repeal the relevant
references to detriment payments.
Under section 295–485 of the ITAA 1997, complying
superannuation funds and approved deposit funds are able to claim an income tax
deduction when they provide a lump sum benefit because of the death of a member
for the benefit of their spouse, former spouse or children. This tax saving
amount—referred to as an anti-detriment payment—is an additional amount that
may be paid to an eligible dependent and represents a refund of the 15 per
cent contributions tax that has been paid by the deceased member over their
lifetime.[177]
While the relevant provisions were inserted into the ITAA
1997 in 2007 by the Tax Laws Amendment
(Simplified Superannuation) Act 2007, an equivalent provision existed
prior to this in former section 279D of the Income Tax Assessment Act 1936.
This provision dates back to 1989, when contributions and earnings tax on
superannuation were introduced by the Hawke Government by the Taxation Laws
Amendment (Superannuation) Act 1989. Introducing the relevant Bill in
1989 the then Assistant Treasurer Peter Morris noted in relation to this
provision:
A special deduction will enable tax exempt death benefits
paid by superannuation funds to be paid at the same levels as before the
changes taking effect from 1 July 1988. This deduction acknowledges that the
contributions tax cannot be compensated for in such cases by the 15 per cent
reduction in tax rates applicable to taxable [eligible termination payments].[178]
Schedule
11—Dictionary
Schedule 11 includes amendments to the ITAA 1997 to
define key terms associated with amendments in other parts of the main Bill
including the term ‘total superannuation balance’.
[1]. A
separate Bill is required for imposition of tax as section 55 of the Constitution requires
that ‘laws imposing taxation shall deal only with the imposition of taxation
and any provision therein dealing with any other matter shall be of no effect.’
[2]. Australian
Taxation Office (ATO), ‘Concessional
contributions caps’, ATO website, last modified 7 September 2016.
Additional information on changes to contributions caps is included in the
Bills Digest prepared for the increase in the cap to $35,000 for those
aged 50 or more from 1 July 2014. See: K Swoboda, Tax
and Superannuation Laws Amendment (Increased Concessional Contributions Cap and
Other Measures) Bill 2013 [and] Superannuation (Sustaining the Superannuation
Contribution Concession) Imposition Bill 2013, Bills digest, 144,
2012–13, Parliamentary Library, Canberra, 18 June 2013.
[3]. ATO,
‘Low
income superannuation contribution’, ATO website, last modified 1 September
2016.
[4]. Additional
information on the LISC, including its discontinuation after the 2016–17
financial year is included in the Bills Digest relating to the repeal of the
minerals resource rent tax. See: K Swoboda, Minerals
Resource Rent Tax Repeal and Other Measures Bill 2013, Bills digest,
27, 2013–14, Parliamentary Library, Canberra, 9 December 2013.
[5]. ATO,
‘Division
293 tax - information for individuals’, ATO website, last modified 14
November 2016. Additional information on the additional 15 per cent
contributions tax for those above a $300,000 annual income threshold is
included in the Bills Digest prepared for the increase in the cap to
$35,000 for those aged 50 or more from 1 July 2014. See: Swoboda, Tax
and Superannuation Laws Amendment (Increased Concessional Contributions Cap and
Other Measures) Bill 2013 [and] Superannuation (Sustaining the Superannuation
Contribution Concession) Imposition Bill 2013, Bills digest, op. cit.
[6]. ATO,
‘Eligibility
for the super co-contribution’, ATO website, last modified 1 September
2016. Additional information on changes to the superannuation co-contribution
arrangements is included in the Bills Digest prepared for changes made in 2013
to reduce the maximum co-contribution amount from $1,000 to $500. See: K
Swoboda and J Chowns, Tax
and Superannuation Laws Amendment (2013 Measures No. 2) Bill 2013,
Bills digest, 137, 2012–13, Parliamentary Library, Canberra, 13 June 2013.
[7]. ATO,
‘Super
guarantee percentage’, ATO website, last modified 7 September 2016.
Additional information on the progressive increase in the superannuation
guarantee rate is included in the Bills Digest prepared for the repeal of the
minerals resource rent tax. See: Swoboda, Minerals Resource Rent Tax
Repeal and Other Measures Bill 2013, Bills digest, op. cit.
[8]. Australian
Government, Budget
measure: budget paper no. 2: 2016–17, pp. 24–30.
[9]. S
Morrison, ‘Second
reading speech: Appropriation Bill (No. 1) 2016-2017’ House of
Representatives, Debates, 3 May 2016, p. 4258.
[10]. G
Chan, ‘Coalition
backbenchers seek change to super proposal which could cut savings’, The
Guardian, 23 August 2016
[11]. M
Turnbull (Prime Minister), Interview
with David Penberthy and Will Goodings: 1395 FiveAA, Adelaide, South Australia,
transcript, 3 June 2016.
[12]. S
Morrison (Treasurer) and K O’Dwyer (Minister for Revenue and Financial
Services), Even
fairer, more flexible and sustainable superannuation, joint media
release, 15 September 2016.
[13]. Ibid.
[14]. S
Morrison (Treasurer) and K O’Dwyer (Minister for Revenue and Financial
Services), Joint
press conference, Canberra: superannuation reforms; making superannuation more
sustainable; plebiscite on same sex marriage, transcript, 15 September
2016, p. 4.
[15]. The
Treasury, ‘Superannuation
reform package’, The Treasury website.
[16]. The
Treasury, ‘Superannuation
reform package - tranche two’, The Treasury website.
[17]. The
Treasury, ‘Superannuation
reform package - tranche three’, The Treasury website.
[18]. The
Treasury, Tax
expenditures statement 2015, The Treasury, Canberra, January 2016, p. 8.
[19]. See
for example, R Clare, Mythbusting
superannuation tax concessions, the Association of Superannuation Funds
of Australia Limited, Sydney, October 2015.
[20]. See
for example, J Daley and D Wood, ‘Future
taxpayers will pay the price’, The Australian, 16 May 2016,
p. 20.
[21]. For
more information about the intergenerational reports, see: K Swoboda, ‘A
comparison of key assumptions and outcomes over four intergenerational reports’,
Flagpost, Parliamentary Library blog, 5 March 2015.
[22]. W
Swan, Australia
to 2050: future challenges, The Treasury, Canberra, January 2010,
p. 146.
[23]. National
Commission of Audit, ‘Appendix to the report of the National Commission of
Audit: volume 1’, Towards
responsible government, National Commission of Audit, Canberra,
February 2014, p. 162.
[24]. K
Henry, Australia’s future tax system: report to the Treasurer, (Henry
Tax Review) ‘Part
two: detailed analysis’, vol. 1, The Treasury, Canberra, December 2009,
p. 100.
[25]. B
Shorten, ‘Second
reading speech: Tax Laws Amendment (Stronger, Fairer, Simpler and Other
Measures) Bill 2011’, House of Representatives, Debates,
2 November 2011, p. 12417.
[26]. W
Swan (Treasurer) and B Shorten (Minister for Financial Services and
Superannuation),
Superannuation roundtable, joint media release, 29 January
2012.
[27]. ATO,
‘Division
293 tax - information for individuals’, ATO website, last modified 14
November 2016. Additional information on the additional 15 per cent
contributions tax for those above a $300,000 annual income threshold is
included in the Bills Digest prepared for the increase in the cap to
$35,000 for those aged 50 or more from 1 July 2014. See: Swoboda, Tax
and Superannuation Laws Amendment (Increased Concessional Contributions Cap and
Other Measures) Bill 2013 [and] Superannuation (Sustaining the Superannuation
Contribution Concession) Imposition Bill 2013, Bills digest, op. cit.
[28]. W
Swan (Treasurer) and B Shorten (Minister for Financial Services and
Superannuation), Reforms
to make the superannuation system fairer, joint media release,
5 April 2013.
[29]. J
Hockey (Treasurer) and A Sinodinos (Assistant Treasurer), Restoring
integrity in the Australian tax system, joint media release,
6 November 2013.
[30]. Financial
System Inquiry,
Financial System Inquiry: interim report, Treasury, Canberra, July
2014, p. 2–122.
[31]. Financial
System Inquiry,
Financial System Inquiry: final report, The Treasury, Canberra,
November 2014, p. 142.
[32]. Australian
Government, Re:think:
tax discussion paper: better tax system, better Australia, The
Treasury, Canberra, 30 March 2015.
[33]. Ibid.,
p. 69.
[34]. J
Hockey (Treasurer), Speech
to the PwC Tax Forum, Melbourne, speech, 15 July 2015, p. 3.
[35]. S
Morrison (treasurer), Address
to the Association of Superannuation Funds of Australia (ASFA) Conference,
Brisbane, speech, 27 November 2015, p. 13.
[36]. Association
of Superannuation Funds of Australia (ASFA), Submission
to the Treasury, Pre-Budget submission for the 2016–2017 Budget,
February 2016, p. 4.
[37]. J
Daley, ‘Cut
super tax breaks, yet get a good retirement’, The Australian Financial
Review, 12 March 2016, p. 16.
[38]. Australian
Prudential Regulation Authority (APRA),
Statistics, Quarterly superannuation performance, June 2016, APRA,
Sydney, 23 August 2016, p. 7.
[39]. R
Maddock, Superannuation
asset allocations and growth projections, Financial Services Council,
Monash University and Victoria University, 17 February 2014, p. 6.
[40]. Australian
Bureau of Statistics (ABS), Household
Income and Wealth, Australia, 2013–14, cat. no. 6523.0, ‘Income wealth
and debt: table 3.7 Low economic resource households, household assets and
liabilities’, ABS, Canberra, 4 September 2015.
[41]. Australia,
Senate, Journals,
15, 2016–17, 10 November 2016, p. 21.
[42]. Senate
Standing Committee on Economics Legislation, ‘Superannuation
(Excess Transfer Balance Tax) Bill 2016 [Provisions] and Treasury Laws
Amendment (Fair and Sustainable Superannuation) Bill 2016 [Provisions]’,
Inquiry homepage.
[43]. Senate
Standing Committee on Economics Legislation, Superannuation
(Excess Transfer Balance Tax) Bill 2016 [Provisions] and Treasury Laws
Amendment (Fair and Sustainable Superannuation) Bill 2016 [Provisions],
The Senate, Canberra, November 2016, p. 23.
[44]. Ibid.,
pp. 25–26.
[45]. Ibid.,
p. 28.
[46]. C
Bowen, ‘Second
reading: Superannuation (Objective) Bill 2016, Treasury Laws Amendment (Fair
and Sustainable Superannuation) Bill 2016, Superannuation (Excess Transfer
Balance Tax) Imposition Bill 2016’, House of Representatives, Debates,
22 November 2016, p. 1.
[47]. Ibid.
[48]. B
Shorten (Leader of the Opposition) and C Bowen (Shadow Treasurer), Labor's
plan for fair, sustainable superannuation, joint media release,
22 April 2015.
[49]. Ibid.
[50]. C
Bowen (Shadow Treasurer) and K Gallagher (Shadow Minister for Small Business
and Financial Services), Labor's
plan for super reform that is not retrospective, joint media release,
24 August 2016.
[51]. Ibid.
[52]. C
Bowen (Shadow Treasurer) and K Gallagher (Shadow Minister for Small Business
and Financial Services), A
super system that’s fairer & a budget that’s better off, joint
media release, 8 November 2016.
[53]. Ibid.
[54]. Ibid.
[55]. Australian
Greens, Progressive
superannuation: supporting people to save for retirement, Greens policy
document, Election 2016, p. 1.
[56]. Ibid.,
p. 2.
[57]. Ibid.,
p. 1.
[58]. Liberal
Democratic Party, Welfare,
Liberal Democratic Party policy document, Election 2016, p. 1.
[59]. D
Leyonhjelm, ‘Government's
great super con job’, The Australian Financial Review,
30 September 2016, p. 38.
[60]. Pauline
Hanson’s One Nation, Home
ownership for young Australians, Pauline Hanson’s One Nation policy
document, Election 2016, p. 1.
[61]. Nick
Xenophon Team, Policy
principles, Nick Xenophon Team policy document, Election 2016,
p. 14.
[62]. Ibid.
[63]. C
Bowen, ‘Second
reading: Superannuation (Objective) Bill 2016, Treasury Laws Amendment (Fair
and Sustainable Superannuation) Bill 2016, Superannuation (Excess Transfer
Balance Tax) Imposition Bill 2016’, House of Representatives, Debates,
22 November 2016, p. 1.
[64]. Association
of Superannuation Funds of Australia (ASFA), Budget
package has significant ramifications for superannuation, media
release, 3 May 2016.
[65]. Ibid.
[66]. ASFA,
Superannuation
package should be passed, media release, 15 September 2016.
[67]. Ibid.
[68]. ASFA,
Pass
super tax changes to provide certainty and confidence, media release,
9 November 2016.
[69]. Ibid.
[70]. Financial
Services Council (FSC), FSC
statement on superannuation tax changes, media release, 3 May
2016.
[71]. Ibid.
[72]. FSC,
Changes
to non-concessional super caps, media release, 15 September 2016.
[73]. Ibid.
[74]. FSC,
Government
super tax changes a step forward – but competition reform is the priority,
media release, 8 November 2016.
[75]. Ibid.
[76]. SMSF
Association, Super
changes cause for concern for SMSFs, media release, 3 May 2016.
[77]. Ibid.
[78]. SMSF
Association, Introduction
of super legislation provides important certainty, media release,
10 November 2016.
[79]. Ibid.
[80]. Industry
Super Australia, Budget
2016 – rebalancing of super tax concessions a sensible step in the right
direction for 3 million lower income earners, media release, 3 May
2016.
[81]. Ibid.
[82]. Industry
Super Australia, Industry
super Australia welcomes workable compromise on super tax breaks, media
release, 15 September, 2016.
[83]. Australian
Institute of Superannuation Trustees, Super
measures will improve fairness and sustainability of super: AIST Budget
commentary, media release, 3 May 2016.
[84]. Australian
Institute of Superannuation Trustees, Super
budget changes still improve fairness and sustainability of system,
media release, 15 September 2016.
[85]. Australian
Institute of Superannuation Trustees, Super
changes that improve retirement outcomes for low income earners must be
supported, media release, 10 November 2016.
[86]. Actuaries
Institute, Actuaries
Institute says Budget injects fairness into retirement incomes system,
media release, 3 May 2016
[87]. Ibid.
[88]. Actuaries
Institute, Actuaries
Institute Chief Executive David Bell welcomed the changes to the superannuation
tax reform package announced today by Treasurer Scott Morrison, media
release, 15 September 2016.
[89]. The
Tax Institute, A
Budget for now and the future, media release, 3 May 2016.
[90]. Ibid.
[91]. Chartered
Accountants Australia New Zealand, The
Government's budget super changes need urgent clarification and adjustment,
media release, 12 May 2016.
[92]. Ibid.
[93]. Ibid.
[94]. J
Daley, B Coates and W Young, A
better super system: assessing the 2016 tax reforms, Working paper, 1,
2016, Grattan Institute, Carlton, September 2016.
[95]. Ibid.,
p. 3.
[96]. J
Roskam, ‘Our
new “soak the rich” Liberals’, The Australian Financial Review,
20 May 2016, p. 34.
[97]. Ibid.
[98]. S
Cowan, M Potter, P Carvalho, J Buckingham, T Jha, S Hudson (The Centre for
Independent Studies), Budget
2016: timid Turnbull tinkers at top and bottom, media release,
3 May 2016.
[99]. R
Carling, ‘How
should super be taxed?’, Policy, 32(3), September 2016.
[100]. M
O’Neill (CEO National Seniors Australia), Seniors
budget verdict: super reforms broadly fair but pension problem persists,
media release, 4 May 2016.
[101]. Ibid.
[102]. Council
of the Ageing Australia, Budget
2016: superannuation reform package welcomed, media release, 3 May
2016.
[103]. Ibid.
[104]. C
Goldie (CEO Australian Council of Social Services (ACOSS)), Some
positive directions, but budget locks in harsh cuts – with more likely to come,
media release, 3 May 2016.
[105]. C
Goldie (CEO ACOSS), ACOSS
statement: superannuation changes announced, media release,
16 September2016.
[106]. Explanatory
Memorandum, Superannuation (Objective) Bill 2016 [and] Treasury Laws
Amendment (Fair and Sustainable Superannuation) Bill 2016 [and] Superannuation
(Excess Transfer Balance Tax) Imposition Bill 2016, pp. 9–10. There is no
financial impact associated with the Superannuation (Objective) Bill 2016.
[107]. The
Statement of Compatibility with Human Rights can be found at pages 129–131,
148–149, 172–174, 191–192, 200, 207, 222–224, 230–231 and 260–261 of the Explanatory
Memorandum to the suite of Bills.
[108]. Parliamentary
Joint Committee on Human Rights, Report
9 of 2016, 22 November 2016, p. 39.
[109]. S
Morrison, ‘Second
reading: Appropriation Bill (No. 1) 2016–2017’, House of Representatives, Debates,
3 May 2016, p. 4255.
[110]. The
Treasury, Making
a fairer and more sustainable superannuation system, Budget 2016: superannuation
fact sheets, The Treasury, Canberra, May 2016; Senate Economics Legislation
Committee, Official
committee Hansard, (proof), 19 October 2016, p. 101.
[111]. Explanatory
Memorandum, Superannuation (Objective) Bill 2016 [and] Treasury Laws Amendment
(Fair and Sustainable Superannuation) Bill 2016 [and] Superannuation (Excess
Transfer Balance Tax) Imposition Bill 2016, p. 37.
[112]. ITAA
1997, proposed section 294–1. The term ‘retirement phase’ is defined
in proposed section 307–80 and generally covers situations where a
superannuation income stream is payable and the person has met a condition to
release funds from superannuation, including retirement or having a terminal
medical condition.
[113]. Inserted
by item 6 of Schedule 11 to the Bill.
[114]. The
indexation arrangements are amended by proposed section 960-285 in Schedule 11,
which amend the broader indexation arrangements that apply in the ITAA 1997
to a range of other thresholds.
[115]. S
Morrison, ‘Second
reading speech: Treasury Laws Amendment (Fair and Sustainable Superannuation)
Bill 2016’, House of Representatives, Debates, 9 November 2016,
p. 78.
[116]. T
Power, ‘Crunching
the numbers: a $1.6 million retirement’, Superguide website, 23 May
2016.
[117]. Association
of Superannuation Funds of Australia, Submission
to the Treasury, Inquiry into tax discussion paper, May 2015, pp. 17–18.
[118]. See
for example, T McCrann, ‘Brutal
but clever’, Herald Sun, 4 May 2016, p. 23.
[119]. Daley,
Coates and Young, A better super system, op. cit., p. 29.
[120]. Item
2 of Schedule 3 to the main Bill inserts proposed subsections 292–85(2)
to (4) into the ITAA 1997.
[121]. Item
7 of Schedule 3 to the main Bill inserts proposed paragraphs 6(1)(da)
and (db) into the Superannuation
(Government Co-contribution for Low Income Earners) Act 2003.
[122]. Item
2 of Schedule 7 to the main Bill inserts proposed subsection 290–230(4A)
into the ITAA 1997.
[123]. ATO,
‘Super
related tax offsets’, ATO website, last modified 24 May 2016.
[124]. Australian
Government, Budget
measure: budget paper no. 2: 2016–17, p. 26.
[125]. ITAA
1997, proposed section 303–4.
[126]. ITAA
1997, proposed section 303–2.
[127]. Explanatory
Memorandum, Superannuation (Objective) Bill 2016 [and] Treasury Laws Amendment
(Fair and Sustainable Superannuation) Bill 2016 [and] Superannuation (Excess
Transfer Balance Tax) Imposition Bill 2016, op. cit., p. 96.
[128]. Item
4 of Schedule 11 of the main Bill inserts proposed subsection 307–230(2)
into the ITAA 1997.
[129]. ITAA
1997, proposed section 294–80 at item 4 of Schedule 1 to the
Bill.
[130]. Item
1 of Schedule 2 to the main Bill inserts proposed subsection 291–20(2)
into the ITAA 1997.
[131]. Items
15, 17 and 18 of Schedule 2 to the main Bill amend various sections of the ITAA
1997.
[132]. Item
21 of Schedule 2 to the main Bill inserts proposed subsections 15(5) and
(6) into the Superannuation
Guarantee (Administration) Act 1992.
[133]. See
for example, B Shorten, ‘Second
reading speech: Tax and Superannuation Laws Amendment (Increased Concessional
Contributions Cap and Other Measures) Bill 2013’, House of Representatives,
Debates, 15 May 2013, p. 3202.
[134]. Australian
Institute of Superannuation Trustees, Super
budget changes still improve fairness and sustainability of system,
media release, 15 September 2016.
[135]. SMSF
Association, Super
changes cause for concern for SMSFs, media release, 3 May 2016.
[136]. J
Daley, B Coates and D Wood, Super
tax targeting, Grattan Institute, Carlton, November 2015, p. 2.
[137]. Ibid.,
p. 39.
[138]. Australian
Government, Budget
measures: budget paper no. 2: 2012–13, p. 41.
[139]. Ibid.
[140]. T
Smith, ‘Second
reading: Tax and Superannuation Laws Amendment (Increased Concessional
Contributions Cap and Other Measures) Bill 2013, Superannuation (Sustaining the
Superannuation Contribution Concession) Imposition Bill 2013’, House of
Representatives, Debates, 29 May 2013, p. 4262.
[141]. Schedule
3, Tax and
Superannuation Laws Amendment (Increased Concessional Contributions Cap and
Other Measures) Act 2013.
[142]. ATO,
‘Income
tests’, ATO website, last modified 10 August 2016.
[143]. C
Bowen (Shadow Treasurer) and K Gallagher (Shadow Minister for Small Business
and Financial Services), A
super system that’s fairer & a budget that’s better off, media
release, 8 November 2016.
[144]. Item
2 of Schedule 3 to the main Bill inserts proposed subsections 292–85(2)
to (4) into the ITAA 1997.
[145]. ATO,
‘Non-concessional
contributions cap’, ATO website, last modified 7 September 2016; subsection
292–85(2), ITAA 1997.
[146]. ATO,
‘Non-concessional contributions cap’, op. cit.
[147]. Subsections
292–85(3) and (4), ITAA 1997.
[148]. S
Morrison (Treasurer) and K O’Dwyer (Minister for Revenue and Financial
Services), Even
fairer, more flexible and sustainable superannuation, joint media
release, 15 September 2016.
[149]. Bowen
and Gallagher, A super system that’s fairer & a budget that’s better off,
op. cit.
[150]. Explanatory
Memorandum, Minerals Resource Rent Tax Repeal and Other Measures Bill 2013,
p. 37.
[151]. J
Hockey, ‘Second
reading speech: Minerals Resource Rent Tax Repeal and Other Measures Bill 2013’,
House of Representatives, Debates, 13 November 2013, p. 86.
[152]. ATO,
‘Annual
reports - low income superannuation contributions’, ATO website, last
modified 17 October 2016.
[153]. Australian
Institute of Superannuation Trustees, Super
changes that improve retirement outcomes for low income earners must be
supported, media release, 2016.
[154]. Explanatory
Memorandum, Taxation Laws Amendment Bill (No. 2) 1992, pp. 92–95; P Baldwin,
‘Second
reading speech: Taxation Laws Amendment Bill (No. 2) 1992’, House of
Representatives, Debates, 2 April 1992, p. 1767.
[155]. Chartered
Accountants Australia New Zealand, Submission
to the Treasury, 2015–16 Pre-budget submission, 6 February 2015,
pp. 13–15.
[156]. Australian
Labor Party (ALP), CPA
Australia: governance and accountability in government: if re-elected, will the
Labor Government commit to improving accountability and associated governance.
ALP policy document, Election 2010, p. 12,
[157]. Item
4 of Schedule 6 to the main Bill inserts proposed subsections 291–20(3)
to (7) into the ITAA 1997.
[158]. S
Morrison, ‘Second
reading speech: Treasury Laws Amendment (Fair and Sustainable Superannuation)
Bill 2016’, House of Representatives, Debates, 9 November 2016,
p. 78.
[159]. SMSF
Association, SMSF
urges flexible approach to concessional caps, media release,
29 March 2016.
[160]. Bowen
and Gallagher, A super system that’s fairer & a budget that’s better off,
op. cit.
[161]. Item
1 of Schedule 7 to the main Bill amends existing paragraph 290–230(2)(c) of
the ITAA 1997.
[162]. Explanatory
Memorandum, Taxation Laws Amendment Bill (No. 3) 1997.
[163]. Liberal
Party of Australia and the Nationals, Super
for all: security and flexibility in retirement: the federal Coalition's
superannuation and retirement incomes policy, Coalition policy
document, Election 1996, p. 9.
[164]. ATO,
‘Table 1: Selected items for income years 1978–79 to 2013–14’, ‘Taxation
statistics 2013–14: individuals’, ATO website, last modified 18 March
2016.
[165]. S
Morrison, ‘Second
reading speech: Treasury Laws Amendment (Fair and Sustainable Superannuation)
Bill 2016’, House of Representatives, Debates, 9 November 2016,
p. 78.
[166]. ATO,
‘SMSF
– transition to retirement income streams’, ATO website, last modified 19
September 2014.
[167]. Australian
Government, A
more flexible and adaptable retirement income system, Australian
Government, Canberra, February 2004.
[168]. Ibid.,
p. 10.
[169]. Superannuation Industry
(Supervision) Amendment Regulations 2005 (No. 2).
[170]. See
for example, P Coorey, ‘Super
transition tax “loopholes” in play’, The Australian Financial Review,
29 October 2015, p. 1.
[171]. Productivity
Commission (PC), Superannuation
policy for post-retirement, Research paper, ‘vol. 2: supplementary papers’,
PC, Canberra, July 2015, p. 144.
[172]. Ibid.,
p. 21; Henry, Australia’s future tax system, ‘Part two: detailed
analysis’, vol. 1, op. cit., p. 121; Financial System Inquiry, Financial
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[173]. W
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