The Australian Government's radical changes to the domestic
pension rules may jeopardise the gradual transfer of UK relevant
transfer funds to that jurisdiction.
No sooner had Australian QROPS come back on the market with an
'over 55' style, than the Australian Government made some
radical changes to the domestic pension rules, which might
jeopardise the gradual transfer of UK-relevant transfer funds to
The 'devil is in the detail' and it is even more
important for people to take specialist advice on this subject.
Simply transferring AU$180,000 per year or AU$540,000 every three
years, which has been the traditional route, may now not be the
To ensure the superannuation tax arrangements support the
objective of superannuation and are fiscally sustainable, the
Government will better target tax concessions to those who need
incentives to save by:
- Introducing a $1.6 million superannuation transfer
balance cap on the total amount of superannuation that an
individual can transfer into retirement phase accounts.
This puts a limit on taxpayer support for tax-free
retirement phase accounts, but does not limit the savings that can
be accumulated outside these accounts or outside superannuation. A
balance of $1.6 million could support an income stream in
retirement of around four times the level of the single Age
The transfer balance cap will affect less than one per cent
of superannuation fund members and will be applied to both current
retirees and to individuals yet to enter their retirement
- Requiring those with combined incomes and superannuation
contributions greater than $250,000 to pay 30 per cent tax
on their concessional contributions, up from 15 per cent.
This extends the current treatment of people with combined incomes
and superannuation contributions over $300,000. These individuals
will still have significant incentives to save for their
retirement. This change will only affect around one per cent of
superannuation fund members.
- lowering the superannuation concessional
contributions cap to $25,000 per annum. This level still
enables individuals to make enough contributions over their working
life to be self-sufficient in retirement. Lower caps on
concessional contributions also make it feasible to allow more
flexibility across the system to accommodate modern working
arrangements. Reducing the caps on concessional contributions will
only affect around three per cent of superannuation fund
- introducing a $500,000 lifetime cap for
non-concessional contributions. The lifetime cap will
limit the extent to which the superannuation system can be used for
tax minimisation and estate planning. Currently, less than one per
cent of superannuation fund members have made contributions above
this cap since 2007.
Broadly commensurate treatment will apply to defined benefit
In addition to better targeted tax concessions, the
Government will introduce the Low Income Superannuation Tax
Offset to replace the Low Income Superannuation
Contribution when it expires on 30 June 2017. This will continue to
support the accumulation of superannuation for low income
This will allow individuals with an adjusted taxable income
of $37,000 or less to receive an effective refund of the tax paid
on their concessional contributions, up to a cap of $500. The
Low Income Superannuation Tax Offset will, in particular, assist
women to build their superannuation savings.
Taken together, these changes will better target the
concessional taxation of superannuation and help to ensure that the
superannuation system remains sustainable for the benefit and
retirement security of all Australians.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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ATO has released 2 draft fact sheets relating to the 2010 amendments to corporate law and tax in relation to dividends.
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