07/11/2013 – The Government has stated that soon after they were elected they were advised that ninety-six tax and superannuation announcements (one dating back to March 2001) had not been legislated. Four of these have been dealt with as part of the carbon and mining tax repeal package.
The remaining ninety-two measures of unlegislated tax and superannuation measures have been classified into three groups:
• Not proceeding
• Further consultation required.
They are determined to resolve all policies relating to these matters by 1 December 2013 for inclusion in the Mid-Year Economic and Fiscal Outlook (MYEFO) and intend that the bulk of legislation that is to be progressed should be passed by the Parliament by 1 July 2014.
The most welcome announcement for Australian expats is that the Government will not proceed with the tax on superannuation pensions which earn above $100,000 per annum. A list of what is and isn’t proceeding as well as being under review is listed below. We have only listed what is most applicable to Australian expats.
Superannuation proposals that are proceeding
Transfer of lost member accounts to the Australian Taxation Office (ATO)
The Government will proceed with increasing the threshold whereby lost accounts are required to be transferred to the ATO from $2,000 to $4,000, and then to $6,000. This is estimated to add more than $815 million to consolidated revenue. Australian expats should seriously consider reviewing all of their super accounts and ensure that they are consolidated so they are not caught up in the sweep.
Superannuation proposals that are not proceeding
Tax on superannuation pensions
The Government will not proceed with Labor’s announcement of 5 April 2013 which would have taxed people’s superannuation pension earnings above $100,000 in the draw-down phase. The Government acknowledged that complexity and compliance costs associated with this initiative are extreme and essentially undeliverable.
It is estimated that not proceeding with this measure will negatively impact the underlying cash balance by $313 million over the current forward estimates period.
This move will be welcomed by all superannuation funds, administrators as well as expats. When Labor set the precedent of dipping into the Australian super system it potentially set us on a dangerous path with the possibility of the government either lowering the threshold for when a tax will be levied and/or increasing the tax rate above 15%.
Superannuation proposals that require further consultation
Acquisitions and disposals of certain assets between related parties of self-managed superannuation funds (SMSFs)
The May 2011 Budget contained an announcement that there would be restrictive rules for the acquisition and disposal of certain assets between SMSFs and related parties. Although legislation was drafted, it was excised from the relevant Bill, meaning that there were no changes made to the related party acquisition and disposal rules. Hopefully the Government will confirm that other changes to law, including the requirement for all SMSF transactions to be conducted at market value, providing there is sufficient comfort that no manipulation of prices will result in favourable capital gains tax and contribution cap outcomes. Even though this proposal doesn’t affect expats because of their inability to operate a SMSF whilst they’re a non-resident, it does have ramifications for them on their return to Australia.
Verification of SMSF members and bank accounts
The Cooper review recommended changes to ensure that superannuation money is transferred to a valid SMSF bank account. The recommendation included that a register is provided to enable APRA funds to check SMSF details to meet data and e-commerce standards. This proposal appears quite valid given that often bank officers opening the relevant accounts do not understand the significance of the difference between a personal tax file number (TFN) and an SMSF TFN and ABN. This can often result in personal accounts being opened instead of SMSF accounts to get better rates or lower fees. It is not until the auditor of the fund comes along that often the mistake is recognised. Worse still, the ATO includes fund income in a personal tax return rather than an SMSF return. As commented above this doesn’t affect expats whilst they are non-resident however on their return should they elect to setup a SMSF this needs to be monitored.
Superannuation fund reporting
It was announced in the May 2011 Budget that superannuation funds would be required to notify members whether contributions have been received, either quarterly or six monthly (to alert members about unpaid superannuation). Superannuation funds are already required to report to members on a regular basis and it seems unclear as to what additional benefit this measure would add.
Should you have any questions regarding the above changes please feel free to contact us.