Australia: Superannuation Law Update

Last Updated: 5 June 2006
Article by Peter Charteris

New Superannuation rules at a glance

From 1 July 2007:

  • A person who meets the current definition of retirement in Reg 6.01(7), who is 60 or over, will not pay any tax on either lump sum benefits or pension benefits. >A person under 60 who retires will pay tax at the current rates. There will be some modification to simplify the tax treatment of the components.

  • The low rate threshold (currently $129,751) for lump sum payments under 60 will continue.

  • RBLs are to be abolished.

  • The transition to retirement pensions will remain with modification as to the maximum amount that can be taken – 10% of the account balance each year.

  • Contribution rules are to be simplified. A maximum contribution of $50,000 per annum at the concessional contributions tax rate of 15% will apply regardless of age. There will also be full deductibility for the self-employed. Transitional rules are to apply for persons over 50 who will be able to make contributions of a maximum $100,000 per annum at the concessional contributions tax rate of 15% until 2012.

  • Undeducted contributions are subject to an annual limit of $150,000 which is to commence immediately ie from budget night of 9 May 2006. The Government will consider whether the cap should be averaged over three years.

  • Contributions can be made until age 75.

  • The pension rules are to be simplified, with a simple percentage of account balance minimum each year.

Some details and implications

Transition to retirement for under 65s

Persons wishing to access retirement benefits before age 65 who do not meet the current definition of retirement will need to consider a transition to retirement pension.

Whilst pension payments will be taxed prior to age 60, pension payments for persons aged 60 and above will be tax free. This, combined with deductible contributions, may offer the opportunity to make tax deductible contributions and receive tax free income at the same time.

The main difference between lump sum and pension payments will be the treatment of the account balance that is not applied to a pension. Tax will be paid on earnings not applied to a pension. Account balances applied to the pension phase will continue to be tax free.

The Social Security rules are to be modified to allow a greater asset test. However, the concession applying to complying pensions will cease to apply from 20 September 2007.

Complying pensions

A complying pension such as a term allocated pension entered into prior to this date will continue to be subject to the old Social Security asset test rules.

It is not clear if a person can opt out of a complying pension once the new rules commence. Logically there is no reason why they could not opt out, except where there are Social Security implications. Likewise there is a strong argument for choice. However, once the residual value of the pension falls below the assets test, then the pensioner will want to opt out, so there will be some further policy matters to be considered.

Eligible termination payments

The eligible termination payment rules are to be altered. Eligible termination payments at the concessional rate (equivalent to current superannuation concessional rates) are to be limited to a maximum of $140,000. It is a per employer limit. Roll over to super is not allowed.

Contribution splitting

Contribution splitting will be irrelevant for most people, although couples who wish to access two low rate ETPs prior to age 60 may still be attracted to this option. Contribution splitting also allows the acceleration of access to pension entitlements and low rate ETP’s where there is a significant age gap between spouses and the recipient wishes to transfer to an older spouse who is eligible to receive such co-contributions.

Tax treatment

The pre-1983 concessional undeducteds, post-1984 invalidity, capital gains tax exempt will all become a new tax exempt component.

The general tax rates for taxable amounts will not change, that is to say, 20% for under age 55, 0% for the first $129,751 and thereafter 15% when aged 55 to 59, 0% when aged 60 and over. Death benefits Death benefits appear largely unchanged.

No compulsory withdrawal

There will no longer be any compulsory withdrawal of benefits.

Lifetime pensions

Lifetime pensions will become redundant, other than possibly for Social Security rules. Existing pensions will be subject to transitional rules. For some pensioners, there is still a need for income over the whole of the pensioner’s actual life. It is not clear what incentives are to be offered. As earnings on assets applied to a transition to retirement pension are exempt from tax, there are some interesting issues if there is no minimum withdrawal requirements as proposed.

Co-contributions for self-employed

The co-contribution scheme is to be extended to the self-employed.


Portability is to be further streamlined. The maximum time limit is to be reduced from 90 days to 30 days. A standard portability form is to be introduced. If implemented successfully, the current liability issues that a trustee faces of having to be satisfied that the member is aware that they can ask for information for the purpose of understanding any benefit entitlements before the transfer is made is removed. If so, this will simplify and speed up the process. If this obligation is not removed there is potentially a greater trustee liability than there is now. It is not clear what is to happen to the $5,000 minimum amount where an interest is retained in the fund. Will this be further modified or will the current issues as to when an amount can be retained simply be aggravated?


There are significant issues raised by the proposal and as time goes on more issues will be identified. The original proposal will not be the simple change that is suggested in the Budget. 

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.