Paul Keating proposes Longevity Levy to supplement Super Guarantee

The former Prime Minister Paul Keating has made an argument for both increasing the Superannuation Guarantee and creating a safety net for after super runs out, noting “You can’t save under super for 30 years or 35 years and then live another 30 years off from it”.

In an interview with Lateline Paul Keating proposed a ‘longevity levy’ of 2-3% of wages to fund an insurance scheme for the provision of “income support, aged care and aged accommodation”. An alternative also proposed would involve changes to the preservation rules so money remained in super for longer, or as Mr Keating put it “to quarantine, say, 25 per cent of it where preservation rules would apply where they can’t touch it till 80”.

Recent comments in a speech by the treasurer Joe Hockey have also drew attention to the adequacy of superannuation: “despite spending billions of dollars in taxation benefits for superannuation, by 2050 the ratio of Australians receiving a full or part pension will still be around four out of five”.

However when the Superannuation Guarantee was introduced by the Keating government in 1992 it was at 3%, and only reached 9% in 2002/03:

Historical rates for Superannuation Guarantee

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Keeping SMSF assets separate from other assets

Keeping SMSF assets separateTrustees who fail in their duty of keeping SMSF assets separate from other assets can expose their funds to fines of up to $ 17,000.

Under SIS Regulation 4.09A – Money and Other Assets to be Kept Separate SMSFs are required to keep money and other assets separate from:

  • assets held personally by the trustee
  • assets of a “standard employer-sponsor, or an associate of a standard employer-sponsor, of the fund”

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SMSFs & Market Value: When is it required?

SMSF annual market-value valuationWhile from 2012/13 SMSFs are required to value assets at market value , which we discussed in another article, there are a number of areas in which SMSFs were already required to use market values:

  • Related Party Transactions
  • Collectables and Personal Use Assets
  • In-House Assets
  • Pensions

Collectables and Personal-Use Assets

SIS Regulation 13.18AA places additional requirements on SMSFs holding ‘Collectables and Personal-use Assets’, which include:

  • Art
  • Antiques
  • Jewellery
  • Motor Vehicles

For the full list, see regulation 13.18AA

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SMSFs & Annual Market Valuations

SMSF annual market-value valuationBeginning in the 2012/13 financial year SMSFs are required to value all assets at Market Value for preparation of the annual accounts, or breach SIS regulation 8.02B. As this would breach s35B of the SIS Act, it can result in a fine of 100 penalty units, currently a total of $17,000.

This change to the Superannuation Industry (Supervision) Regulations 1944 was made by the Superannuation Industry (Supervision) Amendment Regulation 2012 (No. 2).

Prior to the introduction of this regulation the ATO encouraged SMSFs to value assets at market value (including in Superannuation Circular 2003/1), but could not compel it, other than under the requirements relating to Exempt Current Pension Income and In-House Assets.

Though the Australian Accounting Standards (AAS 25 – Financial Reporting by Superannuation Plans) require valuations at net market value as at reporting date, as SMSFs aren’t ‘reporting entities’ this standard doesn’t apply.

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When does the Preservation Age increase?

Update: Preservation age for superannuation has started to increase

The National Commission of Audit (NCOA) has recommended an increase in the superannuation preservation age, but if the documents released are any indication the transition period is likely to cause confusion.

On the 1st of May the National Commission of Audit report was released, among other recommendations, includes an increase in the superannuation preservation age, to bring it closer to an also proposed increase in the age pension age. Currently the superannuation preservation age is set to increase to 60, while the age pension age is set to increase to 67:

Comparison Superannuation Preservation Age and Age Pension Age

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IPA: Increase contributions caps, remove work test & 10% rule

SMSF & Superannuation NewsThe Institute of Public Accountants (IPA) has made a number of recommendations for improving the superannuation system to the Financial System Inquiry:

  • Increasing the Concessional Contributions Cap
  • Maintaining the Low Income Superannuation Contribution (LISC)  or increasing the Co-Contribution
  • Removing the 10% rule for personally deducted concessional contributions
  • Removing the work test
  • Introducing a “life-time concessional contributions cap”
  • Introducing a deductible spouse concessional contribution
  • Policies to encourage annuities and life pension products
  • Increase access to a low rate cap lump sum, changes to taxation of withdrawals above a limit
  • Increase the amount that can be withdrawn under the hardship provisions
  • Lower the minimum pension draw-down limits
  • Remove the requirement for a bare trust under a  Limited Recourse Borrowing Arrangement
  • Move the Small Business Superannuation Clearing House to the jurisdiction of the ATO
  • Increase the employee limit of the clearing house to 100
  • Allow for employee superannuation to be paid through BASs

The full submission can be found here (PDF) which includes many other, non-super, recommendations.

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Current State of Superannuation Changes – April 2014

Superannuation Legislation & Updates

An update on the current state of superannuation changes passed, working their way through parliament, or un-legislated.



Deeming Rules

The extension of the deeming rules to Account-Based pensions was passed as part of the Social Services and Other Legislation Amendment Bill 2013.


Superannuation Guarantee and Low Income Super Contribution

Two announced super changes are contained in the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013, the slowing of the increase to the Superannuation Guarantee and the cancelling of the Low Income Superannuation Contribution. However this bill is currently marked as ‘Not Proceeding’ on the APH website, due to it not passing the Senate. It is expected this bill will reappear in one form or another in 3 months time or after the new senate takes over.

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Will there be a review of SMSF Borrowing and LRBAs?

SMSF borrowing property - limited recourse borrowing arrangement LRBAComments by the then Assistant Treasurer Arthur Sinodinos seem to have put to an end to the long-expected review into SMSF Limited-Recourse Borrowing Arrangements (LRBAs). However there is still support for such a review in the submissions so far to the Financial System Inquiry.

The Cooper Review (Super System Review) made the following recommendation in regards to SMSF borrowing and LRBAs:

Recommendation 8.10: The 2007 relaxation of the borrowing provisions and the consumer protection measures that have recently been announced should be reviewed by government in two years’ time to ensure that borrowing has not become, and does not look like becoming, a significant focus of superannuation funds.”

As the Cooper Review was released in 2010 this would have meant a review of LRBAs by 2012. It appears from the Review Paper that the thinking behind the above recommendation was that the changes to SMSF borrowing were “still recent”. The announcement by the government of the intention to make LRBAs Financial Products under the Corporations Act seems to have also influenced the Panels thoughts on the matter. However it is now over four years since that announcement and the proposed changes have not been implemented. The Panel did seem to be concerned about SMSFs borrowing, believing it to be “inconsistent with Australia’s retirement policy” and wanted to ensure that “borrowing does not become a significant focus of SMSFs”.

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