Legislation has gone before the Parliament to make amendments to the superannuation changes passed late last year, including to TRISs, but without a change to how LRBAs are treated which was included in the draft.
The Treasury Laws Amendment (2017 Measures No. 2) Bill 2017 includes measures earlier subject to public consultation – referred to by Treasury as “minor and technical” amendments and integrity of Limited Recourse Borrowing Arrangements (LRBAs).
There have been a number of changes to the draft legislation. Under the draft LRBA repayments were to be included in the calculation of the Transfer Balance Cap and LRBA balance included in the Total Superannuation Balance. However the Bill only includes LRBAs in the Transfer Balance Cap. Apparently Treasury will conduct further consultation on including LRBAs in the calculation of the Total Superannuation Balance.
Though the changes, if passed, would only apply to future LRBAs, per the Explanatory Memorandum:
The changes only apply to borrowings arising under contracts entered into on or after 1 July 2017. They do not apply to the refinancing of the outstanding balance of borrowings arising under contracts entered into prior to 1 July 2017, or to contracts that were entered into prior to 1 July 2017 but that complete after that time.
The Bill would also make changes to Transition to Retirement Income Streams (TRISs). The EM says that “a superannuation income stream that is established as a TRIS will always retain its character as a TRIS”. This means, under the rules introduced in 2016, that such a pension couldn’t be in ‘retirement phase’, even after the pensioner had satisfied a condition of release with a nil cashing restriction, and so wouldn’t be able to claim ECPI.
To avoid people having to commute and start new, non-TRIS, pensions the Bill includes a measure so that a TRIS enters the ‘retirement phase’ when the pensioner has satisfied a condition of release with a nil cashing restriction.
This will happen automatically when a member reaches age 65. It will also happen when the member notifies their superannuation income stream provider that they have satisfied a relevant condition of release with a nil cashing restriction. In these circumstances, the superannuation income stream provider becomes eligible for the earnings tax exemption at the time it is notified.
The Bill has yet to pass the House of Representatives, but had already been referred to an inquiry by the Senate Standing Committee on Economics. The Committee does not appear to be accepting submission in regards to the Bill.
Little time was allowed for submissions in response to the public consultation on the draft LRBA changes – only 6 days, including a weekend.
The Inquiry is due to report by 13 June 2017 – which is also the next sitting day for the Senate.
Update: The Senate had agreed on 10 May 2017 that all Bills introduced to the House between Budget night and 1 June that contain “substantive provisions commencing on or before 1 July 2017” be referred to committee. The Senate Economics Legislation Committee has considered Treasury Laws Amendment (2017 Measures No. 2) Bill 2017 and determined, unanimously, “that there are no substantive matters that require examination”.