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Superannuation (Excess Untaxed Roll-Over Amounts Tax) Bill 2006
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage History
Purpose
Background
Financial implications
Main Provisions
Endnotes
Contact Officer & Copyright Details
Superannuation (Excess Concessional Contributions Tax) Bill 2006
Superannuation (Excess Non-Concessional Contributions Tax) Bill 2006
Superannuation (Excess Untaxed Roll-Over Amounts Tax) Bill 2006
Superannuation (Departing Australia Superannuation Payments Tax) Bill 2006
Superannuation (Self Managed Superannuation Funds) Supervisory Levy Amendment Bill 2006
Date introduced: 7 December 2006
House: House of Representatives
Portfolio: Treasury
Commencement: 1 July 2007 or Royal Assent.
The following five Bills implement significant tax changes related to the simplification of superannuation package in the Tax Laws Amendment (Simplified Superannuation) Bill 2006. As these Bills each deal with a significant new tax initiative, for constitutional reasons their provisions were not included in the main Bill noted above. These five related bills are:
The background to these Bills is contained in the Bills Digest covering the Tax Laws Amendment (Simplified Superannuation) Bill 2006. Both this Digest and the Digest on the five related superannuation Bills should be read together.
Significant changes to the superannuation arrangements were first announced in the Budget speech for the 2006–07 budget.(1) Since then the government has made additional changes to the first announced proposals in response to consultation with both industry and the wider public.(2) These Bills are part of the outcome of these consultations.
See the Bills Digest 65, 2006–07 on Tax Laws Amendment (Simplified Superannuation) Bill 2006.
See the Bills Digest 65, 2006–07 on Tax Laws Amendment (Simplified Superannuation) Bill 2006.
See the Bills Digest 65, 2006–07 on Tax Laws Amendment (Simplified Superannuation) Bill 2006.
See the Bills Digest 65, 2006–07 on Tax Laws Amendment (Simplified Superannuation) Bill 2006.
The following section outlines the main provision of each of these Bills.
Item 4 of this Bill imposes the excess contributions tax payable under new section 292-15 of the Income Tax Assessment Act 1997 (ITAA 97). New section 292-15, as well as the other amendments to the ITAA 97 mentioned in this Digest, are inserted by the Tax Laws Amendment (Simplified Superannuation) Bill 2006.
Item 5 specifies that the rate of this tax is to be 31.5 per cent of a person’s excess concessional contributions.
Comment
New section 292-25 ITAA 97 defined a ‘concessional’ contribution to be an amount contributed that is part of the assessable income of a superannuation fund plus an amount specified in regulations in certain limited circumstances.
For concessional contributions to be part of the income of a superannuation fund they generally have to be contributions in respect of which a tax deduction has been claimed.
Item 4 of this Bill imposes a tax on the excess non-concessional contributions under new section 292-80 of the ITAA 97.
Item 5 specifies that the tax rate of the tax imposed by item 4 is 46.5 per cent.
Comment
An excess non-concessional contribution is defined in new section 292-85 of the ITAA 97 to be amounts in excess of the ‘non-concessional contributions cap’. In turn, subsection 292-85(2) of this section defined the non-concessional contributions cap as 3 times the ‘concessional contributions cap’. This latter term is defined in subsection 292-20(2) as being $50 000 in the 2007–08 year. This latter limit is to be indexed to changes in Average Weekly Ordinary Time Earnings (AWOTE) in $5 000 increments. See the Bills Digest for Tax Laws Amendment (Simplified Superannuation) Bill 2006 for additional commentary on proposed indexation method.
Item 4 of this Bill imposes a tax on ‘excess untaxed roll-over amounts under new section 306-15 of the ITAA 97.
Item 5 of this Bill specifies that the tax payable is the maximum rate worked out column 3 of the table in Part 1 of Schedule 7 of the Income Tax Rates Act 1986 in the relevant income year plus 1.5 per cent. Under current tax arrangements, this would give a tax rate of 46.5 per cent.
Comment
An ‘excess untaxed roll-over amount’ is defined in new section 306-15 ITAA 97 as:
New section 307-350 defined this later term as $1m for the 2007–08 year.
This latter limit is to be indexed to changes in Average Weekly Ordinary Time Earnings (AWOTE) in $5 000 increments. See the Bills Digest for Tax Laws Amendment (Simplified Superannuation) Bill 2006 for additional commentary on proposed indexation method.
A ‘departing Australia superannuation payment’ is made to temporary residents (except New Zealanders) after they have left Australia. It is a refund of their superannuation benefits accumulated through working in Australia.
Item 4 of this Bill imposes a tax on departing Australian superannuation payments under new subsection 301-175(2) of the ITAA 97.
Item 5 notes that, under the proposed arrangements, the rates of tax are:
Comment
These rates are no different to the current tax rates applied to departing Australia superannuation payments. Rather, these changes restate the tax rates under the new, simplified, regime.
Item 1 of Schedule 1 of the Bill repeals section 6 of the Superannuation (Self Managed Superannuation Funds) Supervisory Levy Imposition Act 1991 and replaces it with a version that deletes any reference to a penalty for the late lodgement for the levy.
Comment
Self Managed Superannuation Funds (SMSFs) are the fastest growing segment of the superannuation industry. Further, they are the segment of the industry that is attracting increased amount of the Australian Tax Office’s attention.
The Explanatory Memorandum to the Bill notes that the ‘current penalty for the late payment of the supervisory levy is being repealed and replaced by the general taxation interest charge’ (GIC).(3) The current penalty is $10 for every month that the supervisory levy remains overdue.(4)
The GIC is set at a high level to encourage the speedy payment of overdue unpaid amounts. Thus the amount of GIC applied to an unpaid SMSF levy could well exceed the former $10 per month penalty. Thus the proposed changes increase the incentive, and potentially the financial penalty, applying to SMSF trustees who make late payments of this levy.
This paper has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Parliamentary Library, nor do they constitute professional legal opinion.
ISSN 1328-8091
© Commonwealth of Australia 2007
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Published by the Parliamentary Library, 2007.