The Tax Laws Amendment (2007 Measures No. 4) Bill 2007 contains a number of measures designed to clarify or improve the Simplified Superannuation reforms made to the tax laws effective 1 July 2007. Some of the key amendments proposed are summarised below.
No-TFN contributions
The Bill includes amendments regarding no-TFN contributions designed to ensure that, where the Commissioner of Taxation gives notice of a TFN to a superannuation fund trustee, it is taken to have been quoted by the individual so the higher rate of no-TFN contributions tax is not applied to contributions for that individual.
In addition, as it is not possible for a fund trustee to determine whether a particular contribution is no-TFN contributions income until the end of an income year, an amendment has been introduced to the Taxation Administration Act 1953 which will ensure that fund trustees do not need to take account of no-TFN contributions income when working out their PAYG notional tax or benchmark tax for the purpose of PAYG instalments.
Segregated pension assets
The income derived by a complying superannuation fund from the assets supporting a pension is exempt from tax under section 295-385 of the Income Tax Assessment Act 1997 (the 1997 Act) provided that, at the time the income is derived, the assets are “segregated current pension assets”. In return for this concessional tax treatment, pensions are subject to rules designed to ensure that the capital in the pension is drawn down over time (in the case of account-based pensions, a minimum amount must be drawn down each year, calculated as a prescribed percentage of the income stream account balance at the commencement of each financial year).
The Bill clarifies that, in the case of allocated, market-linked and account-based pensions, assets will not be considered “segregated current pension assets” to the extent that the market value of those assets exceeds the account balance of the pension. This is described as an integrity measure, and will give the Commissioner some recourse (other than making a fund non-complying) where the value of the pension assets is deliberately understated so the member can reduce the amount of his or her minimum pension payments. This will apply to both ordinary income and statutory income (capital gains) derived from the assets and will require funds to ensure that reasonable market value is attributed to those assets each financial year.
Capital gains tax small business relief
As the Simplified Superannuation reforms introduced caps on after-tax (non-concessional) contributions, consequential amendments were required to the provisions allowing income to which small business capital gains tax (CGT) relief applied to be contributed to superannuation. The amendments initially allowed a person to contribute income from certain CGT events occurring in the 2007-08 or later income years, up to a lifetime limit of $1M, without the contribution counting toward an individual’s non-concessional contributions cap ($150,000 per annum).
The Bill now extends those provisions to CGT events where either the individual makes the choice to take advantage of the CGT relief, or the proceeds from the CGT events are received, after 30 June 2007. The amendments will apply where either the CGT event occurred prior to the Simplified Superannuation transitional period (10 May 2006 to 30 June 2007) but the payment was made during that period, or where the CGT event occurred during the transitional period but the payment was made after 30 June 2007. A consequential amendment will also extend the CGT provisions to a company or trust that makes a payment to a CGT concession stakeholder after 30 June 2007 in respect of a CGT event that occurred on or before 30 June 2007.
Other amendments
Other relevant amendments to the rewrite of the superannuation tax law:
- provide circumstances where a death benefit can be paid outside the specified timeframe (6 months) and still be treated as a superannuation death benefit (i.e. where the payment was held up because of a dispute or difficulty locating a beneficiary);
- clarify that deductions claimed for insurance premiums under sections 279 and 279B of the Income Tax Assessment Act 1936 are considered when calculating the element untaxed in the fund under the 1997 Act;
- clarify that anti-detriment payments are deductible under the 1997 Act; and
- enable employers to claim a deduction for contributions on behalf of a person who is considered to be an employee for superannuation guarantee purposes, even where that person is not engaged in producing assessable income of the business, or engaged in the business for the employer (i.e. certain directors of corporate trustees).
FURTHER ENQUIRIES
