The Government’s decision to simplify the superannuation regime has been applauded by financial services providers, with the abolition of Reasonable Benefit Limits (RBL) and the tax on end benefits receiving a warm welcome.
Challenger Financial Services Group head of technical services Alex Denham said: “The best we were hoping for was some simplification of the RBL system, perhaps in the form of removing RBL testing on rolling over income streams.
“This is great news for retirees and financial planners. We wonder how term allocated pension providers are going to feel about this one?”
Zurich head of technical services team Sam Wall added: “The Government is proposing a plan to sweep away the current raft of complex tax arrangements and restrictions that apply to people’s superannuation benefits providing all Australians with greater opportunities to save for their retirement.”
The new measures are likely to have a major impact on retirement strategies, and the products selected to provide an ongoing income in retirement.
A spokesman for leading financial services house, Tower Australia Limited, said retirement strategies for the short and medium-term would have to be reassessed, particularly with respect to issues such as capital gains tax, fringe benefits tax and salary packaging.
He said that while it was considered the changes would have a positive impact on most people, considerable rethinking would be required with respect to individual circumstances and superannuation strategies.
According to MLC’s technical manager Andrew Lawless: “There is now a significant incentive to delay retirement until after July 1, 2007, and, where possible, until after reaching age 60.”
He added: “We anticipate that clients in existing pensions will be able, where contractually possible and provided that they will not lose capital, to convert to a new type of pension meeting proposed universal minimum pension standards.
“This could, however, have social security implications for ‘complying’ income streams.”
However, tax consulting firm PricewaterhouseCoopers expressed some concerns.
Partner Paul Brassil said: “At first glance the proposed changes to superannuation are radical but look positive. The proposals appear to remove nearly all the complexity and the tax payable when superannuation benefits are cashed out.
“However, the proposed overhaul will ignite considerable debate on a number of key issues including the administrative burden on superannuation funds, such as the additional reporting of contributions to the ATO and the imposition of a global limit of $50,000 per person, per annum.”
