Lifetime cap for non-concessional contributions says ASFA

The Association of Superannuation Funds of Australia (ASFA) has recommended that non-concessional contributions be subject to a lifetime cap, and super tax-concessions should be removed for super balances above $2.5 million.

The research paper, The equity and sustainability of government assistance for retirement income in Australia, makes several recommendations:

  • The level of concessional contributions should continue to be capped
  • A lifetime cap for non-concessional contributions should be introduced
  • Tax concessions should not apply to very high superannuation balances

ASFA Superannuation Recommendations

The level of concessional contributions should continue to be capped

ASFA argues that the cap on concessional contributions is reducing the tax concessions available to high-income earners and should be continued:

“The current concessional caps are working, so the thresholds should not be lowered, but indexing them is important”.

A lifetime cap for non-concessional contributions should be introduced

The paper also argues that high-income earners can use the non-concessional contributions cap to accumulate large, concessionally-taxed, superannuation balances. ASFA says a better policy would be a lifetime cap on non-concessional contributions, as this would “ensure that superannuation is used to provide income in retirement and is not used for wealth accumulation or estate planning purposes”.

Tax concessions should not apply to very high superannuation balances

ASFA also wants the “disproportionate” amount of superannuation tax-concessions going to high-income earners reduced, and recommends removing “the concessional tax treatment for very high superannuation balances, for example those in excess of $2.5 million”. Though this level can be “adjusted in order to ensure the distribution of tax concessions is more equitable”.

Read More »Lifetime cap for non-concessional contributions says ASFA

ATO Q&A: Admin Penalties, Rectification & Education Directions

ATO - SMSF Admin Penalties, Rectification Directions, Education DirectionsThe ATO has posted a video of the recent webinars for superannuation professionals covering the new powers the ATO has been given to punish non-compliance with the SIS Act.

The ATO has also published answers to some of the questions raised by participants in the webinars:

  • Ignorance of the rules by a trustee will not prevent the ATO from imposing a penalty
  • Admin penalties will only be applied once per contravention “even if the contravention spanned more than one year”
  • Generally where there are multiple contraventions from a single action, the Q&A uses the example of a in-house asset over 5% loan to members, there will only be one admin penalty
  • Where a penalty provision has been contravened the ATO will impose a penalty “in all cases”, but it may be remitted – partially or fully
  • For individual trustees the fine will be imposed on each trustee separately
  • For corporate trustees it is up to the directors to decide how they split the fine, though they are “jointly and severally liable to pay the penalty”
  • The ATO may decide to remit, in part or in full, a penalty for some trustees but not others, depending on the situation
  • Generally admin penalties will be imposed on trustees of the fund at the time of the contravention, not new trustees
  • The ATO has a number of options to recover unpaid penalties, including
    • Payment arrangements
    • Withholding from tax refunds
    • Legal proceedings

Read More »ATO Q&A: Admin Penalties, Rectification & Education Directions

New course approved for ATO Education Direction

ATO Education Direction course

The ATO has approved a second course as meeting the requirements of an Education Direction. This new power granted to the ATO allows notices to be issued to trustees requiring them to undertake a course of education about the obligations of an SMSF trustee and provide evidence of completion to the ATO. This power is one of several new options the ATO has to encourage compliance with the SIS act and regulations.

The course approved is one that was already freely available online to SMSF trustees to learn about their obligations –, which is a joint venture between the accounting bodies CPA and ICAA.

According to the smsftrustee website:

“At the completion of this program, trustees will be able to understand:

  • their roles and responsibilities within a SMSF

  • the investment restrictions imposed on trustees of a SMSF

  • the rules and limitations surrounding contributions and benefit payments within a SMSF

  • the administration involved with a SMSF

  • At the conclusion of the training program, on successful completion of a small quiz, a certificate of attainment will be provided”

The first course approved was the ATOs webinar Self-managed super funds for trustees – an overview.

Read More »New course approved for ATO Education Direction

Growing support against LISC repeal

Parliament MRRT Low Income Superannuation Contribution (LISC) repealThe Government is making a second attempt to pass a repeal of the Low Income Superannuation Contribution (LISC) through the Parliament, as support for the LISC grows.

Introduced by the previous Labor Government the LISC offsets contributions tax for low income earners, up to a limit of $500.  If the bill is passed in its present form the LISC will only operate for the 2012/13 financial year.

The LISC repeal is contained, among other measures, in the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 [No. 2], which passed the House of Reps last week and will likely be making its way to the Senate next week. The first attempt to repeal the LISC was in the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013, which was blocked by the Senate in March.

Speaking to the Parliament about the bill Steven Ciobo, Parliamentary Secretary to the Treasurer, said:

“Schedule 7 of the bill abolishes the Low Income Superannuation Contribution (LISC). The bill ensures that the LISC is not payable in respect of concessional contributions made on or after 1 July 2013.

The government will revisit concessional contribution caps and incentives for lower income earners once the budget is back in a strong surplus.

Low- to middle-income earners may be eligible for the superannuation co-contribution to boost their retirement savings.

The removal of the low income superannuation contribution will improve the budget position by $2.7 billion in cash terms by 30 June 2017


Read More »Growing support against LISC repeal

Current State of Superannuation Changes – EOFY 2013/14

Superannuation Changes

An update of superannuation changes at the end of the 2013/14 financial year, including the current state of superannuation changes passed, working their way through parliament, or un-legislated.

Superannuation Changes 2014 – June


Temporary Budget Repair Levy

The following superannuation-related bills to implement the Budget Repair Levy have passed both houses:

Protection for anticipation of certain discontinued announcements

Following a Treasury consultation the Tax and Superannuation Laws Amendment (2014 Measures No. 2) Bill 2014 has passed both houses of Parliament, pending Asset. The bill gives effect to protections for announced but un-enacted tax and superannuation changes.

Read More »Current State of Superannuation Changes – EOFY 2013/14

Get ready for SuperStream says ATO to SMSFs & employers

ATO - SuperStreamThe ATO has encouraged both SMSFs and employers to get ready for SuperStream.

SuperStream creates a new standard for employers to transmit data about superannuation contributions to super funds, including both SMSFs and APRA funds.

SuperStream for SMSFs

“Put simply, SuperStream will make the transfer from employer to the SMSF easier and quicker” said Mr Philip Hind, ATO’s National Program Manager, Data Standards & E-Commerce (SuperStream). Over the long term the ATO expects SuperStream to reduce the amount of paperwork for trustees, while providing electronic records for accounting and tax obligations.

Employers will start using SuperStream from 1 July 2014 and the “number of employers using SuperStream is anticipated to steadily increase over coming months” . Therefor the ATO says SMSF trustees should check with employers to find out when they are going to start sending contributions data via SuperStream so the SMSFs can “ensure they have all their details at least 60 days before the planned start date”. Mr Hind also said that it only takes a “matter of minutes” to sign up with an SMSF Messaging Provider, and it is a “once-off event”. The SMSF messaging provider gives an SMSF access to an Electronic Service Address (ESA) and is available “at low or no cost”.

Though at this state the “ATO is emphasising education and support for employers and the SMSF industry during the introduction of SuperStream” Mr Hind said that “SMSF trustees should not delay getting ready”.

The ATO includes the following items on the checklist for employees with an SMSF:

  • Check with your employer about when they will start using SuperStream to send contributions data
  • Check that your employer has all the details required about your SMSF “at least 60 days before their planned start date”
  • Provide your employer with your SMSF’s ABN, ESA – Electronic Service Address and bank details

You can find the full checklist on the ATOs website.

Read More »Get ready for SuperStream says ATO to SMSFs & employers

Temporary Budget Repair Levy & Superannuation rates

Temporary Budget Repair Levy - Legislation, Act, BillAnnounced in the 2014 federal budget, the Temporary Budget Repair Levy is an additional 2% tax on individual incomes over $180,000, however it also increases a number of other tax rates. The levy, as legislated, applies for the following financial years:

  • 2014/15
  • 2015/16
  • 2016/17

The following temporary budget repair levy bills relating to superannuation have now passed both houses of parliament:

Read More »Temporary Budget Repair Levy & Superannuation rates

FoFA changes to proceed via regulation and legislation

FoFA changes regulationFollowing the release of the Senate Economics Committee report into the Governments announced FoFA changes, of which the majority report was in support of passing the bill with minor changes, the Acting Assistant Treasurer Senator Mathias Cormann has announced that the changes will proceed largely via regulation with some legislative changes.

In the media release Cormann said that “under the Corporations Act the Government variously has the power to make regulations; some in ‘prescribed circumstances’ or in ‘particular situations’ “, and intends to use this power to give effect the FoFA changes via regulation from “1 July 2014 where that is legally possible”, in order to “provide clarity and certainty for the financial advice industry and for investors seeking financial advice”.

However, speaking to Michelle Grattan of The Conversation Cormann said, with regard to the ability of the Senate to try and disallow the regulations, “that is an option that is available to the Senate and that will be a matter for the Senate to resolve if that occurs”.

Read More »FoFA changes to proceed via regulation and legislation

FoFA changes bill divides Senate committee

FoFA Senate Parliament CommitteeThe Senate Standing Committees on Economics has made its report on the changes to the FoFA reforms, and it appears that the bill will return to the House of Reps with only very minor changes.

The Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 was referred to committee in order to “‘provide a forensic and detailed examination of the legislation and the effects this and previous reforms would and have had on the financial services and investment decisions”. The committee was concerned to “strike the right balance” between consumer protections and the regulator burden on industry. The report includes a report by the majority of the committee and two minority reports.

Majority Report

Best Interest Duty

The majority of the committee was of the opinion that, with small amendments to the bill, “there would be no dilution of the best interests duty, but a greater deal of certainty for both client and adviser”.

Read More »FoFA changes bill divides Senate committee