On Wednesday 6 November 2013, Federal Treasurer Joe Hockey and
Assistant Treasurer Arthur Sinodinos announced the Government's
decision to abandon $3.1 billion worth of Labor's unlegislated
proposals in relation to tax and superannuation.
A key measure affecting superannuation that was abandoned was
the proposal to tax earnings on super assets supporting retirement
income streams. We released an alert on our website on this
measure back in April 2013 when it was first announced (
click here to access the alert) but to summarise, this measure
would have taxed earnings on assets supporting pensions that were
over $100,000 per person in a year.
It was expected to raise $313 million over four years, but the
measure has been ditched, with Mr Hockey describing it as
'undeliverable' due to the complexity involved in its
Industry bodies have welcomed this move. The former Government
estimated that the tax would apply to about 16,000 funds (being
those with more than $2 million of assets) however industry bodies
were concerned that it would apply to a much greater number.
The Government also confirmed that it will repeal the Low Income
Superannuation Contribution (LISC). The LISC was a government
contribution to people earning under $37,000 per year that ensured
that they would not pay more tax on their compulsory superannuation
contributions than they do on their income. This contribution will
no longer be available from the 2013-14 income year and
Other proposals to have been scrapped include:
$2,000 cap on self-education expenses;
fringe benefits tax on motor vehicles; and
the proposed repeal of section 25-90 interest tax deductions
related to foreign earnings.
Proceeding tax measures
The Government will be proceeding with 18 un-enacted measures
that are expected to bring in $10.9 billion of revenue,
thin capitalisation changes designed to reduce the general safe
harbour percentages and the worldwide gearing ratio, extend the
worldwide gearing test to inbound investors, and increase the de
denying access to the research and development (R&D) tax
incentive for companies with income of $20 billion or more;
introducing a withholding regime for foreign residents who are
disposing of taxable Australian property and amendments to clarify
the operation of Australia's taxing rights over indirect
interests in Australian real property;
introducing a new regime for managed investment trusts;
preventing dividend washing;
phasing out of the net medical expenses tax offset;
increasing excise on tobacco and tobacco-related products;
closing loopholes in the consolidation regime, including in
relation to 'entities claiming double deductions'.
The Government is also still considering whether or not to
implement 64 other tax and superannuation initiatives,
new rules for the acquisition and disposal of certain assets
between SMSFs and related parties;
new administrative penalties framework giving the ATO flexible
and cost-effective penalty options when dealing with SMSFs that
breach the law;
reform of the debt/equity integrity rule in section
proposed modernisation of the Controlled Foreign Company (CFC)
codification and clarification of the sovereign immunity rules;
clarification of the earn out rules.
It is expected that the future of these remaining 64 initiatives
will be determined by 1 December 2013.
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