Government committed to no more major changes to taxation of super

Nest egg, superannuaiton, SMSF, retirement
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The Government has “committed to making no further major changes to superannuation taxation” says Assistant Treasurer Stuart Robert.

The Minister told the Alliance for a Fairer Retirement System summit that instead “the focus on any future change will be to simplify Super where ever possible or lessen any burden”.

“The Government is committed to the smooth, ongoing implementation of the superannuation taxation package, to ensure that it remains fair and effective,” said Robert.

The Government still intends to make a number of changes to super – some of which are before the Parliament, and some which the Assistant Treasurer announced at the summit. He announced three measures aimed at “minor but important issues that affect retirees”.

“Firstly, we are fixing an error in the way that market-linked pensions are valued under the transfer balance cap when they are commuted or rolled over, resulting in a nil debit,” he said.

Robert said the nil debit was an issue as it doesn’t accurately reflect the member’s Transfer Balance Cap position, and could lead to a breach of the cap.

Though the ATO has issued guidance on the topic, Robert said the Government was committed to finding a more permanent legislation solution.

The second change Robert announced was a law change to maintain the treatment of market-linked pensions under the Transfer Balance Cap when they have been rolled over due to a successor fund transfer. Currently this can lead to inadvertent breaches of the Transfer Balance Cap.

“The measure I am announcing today will ensure the new market-linked pensions that commence as the result of a successor fund transfer will continue to be treated as a capped defined benefit under the transfer balance cap.”

The third law change is to ensure death benefits that include life insurance proceeds are not subject to tax when they are rolled over to a new super fund.

“The Government recognises this is anomalous with the tax treatment of death benefits taken out of superannuation and out of line with the policy that death benefits are tax free for dependants. This measure ensures that death benefit lump sums remain tax-free for dependants, even if rolled over within the superannuation system.”

“These changes will ensure that the superannuation tax system operates smoothly and fairly,” Robert said.

SMSF Association supports market-linked pension change

The SMSF Association supports the changes announced by the Assistant Treasurer. CEO John Maroney said: “The move to fix the way that market-linked pensions are valued under the Transfer Balance Cap (TBC) when they are commuted or rolled over, resulting in a nil debit, is another positive for the superannuation system.”

“We support the intention to have a more permanent legislative solution to ensure the value of a commuted market-linked pension is correct.”

Maroney said that the July 2017 super changes have caused “significant distress” for people with legacy pensions, with the change by the Government a “step in the right direction to simplify the superannuation system”.

“These are all changes the Association has been asking the Government to adopt, with the end result being better outcomes for many people in the super system,” he said.

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