After an extensive consultation period with industry bodies and other stakeholders, the Government has announced the final version of its Plan to Simplify and Streamline Superannuation, proposed as part of this year’s Federal Budget.
All the major initiatives contained in the original proposal have been retained, with several refinements also added, following a consultation process that brought 1,500 written submissions and over 3,500 phone calls from individuals, businesses and organisations.
According to Russell director of actuarial and benefits consulting Steve Schubert: “The changes are helpful, but they’re not profound … they don’t really change the fundamental goals of the original announcements.”
From a practical perspective, he said that some of the more useful changes resulting from the consultation related to the collection of taxation from individuals who have breached a $50,000 annual limit on concessionally taxed salary-sacrifice contributions.
Whereas previously this was the responsibility of superannuation funds, changes mean it is now the responsibility of the Australian Taxation Office.
“From a practical point of view, it’s quite a useful amendment, because it previously created a lot of work for funds in between. What they have come up with is much neater … the individual’s responsible for it.
“This was a perennial problem for super funds. [The new approach] is more consistent with the normal way you tax people … the onus is on the individual,” Schubert said.
Another variation to the original proposals relates to the Tax File Number (TFN) withholding tax. Reducing inefficiency and double-handling, individuals who have quoted their TFN to their employer for employment purposes are now deemed to have also provided it for superannuation purposes.
Changes also mean that new withholding tax requirements impacting members who have provided a TFN are deferred until June 30, 2008.
Schubert said the simplification of complex minimum and maximum restrictions on allocated pensions is also a positive development for individuals.
“Instead of having to commute pension amounts and take up a new product, they can restructure the existing arrangement.
“By simplifying the pension rules, it’s almost given people a clean canvas to work with, but the problem is … [people then think] ‘how should I structure this? I’ve now got flexibility, how do I use that, how do I draw my savings down in a structured way to suit my personal needs?’”
He suggests this creates greater opportunities for financial planners. “For good financial planners, this will be a boon — [it allows] more of a genuine financial planning focus.
“The big plus for planners is instead of having to finesse these RBLs [Reasonable Benefit Limits] and taxes … they’ll be able to now focus on the really important stuff of helping people plan their retirement, draw down their savings and invest wisely.”
