11 May 2004
IMPROVING THE INTEGRITY OF THE SUPERANNUATION SYSTEM
The Government will make changes to the superannuation laws to target tax avoidance arrangements used primarily by small and non-arms length superannuation funds, the Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, announced today.
These changes will address schemes involving the forfeiture of superannuation benefits, contributions to reserve accounts, and the use of defined benefit funds and defined benefit pensions.
These arrangements seek to maximise the concessionality of superannuation far beyond what was ever intended by Parliament by avoiding deduction and reasonable benefit limits as well as the payment of the superannuation surcharge.
They also provide opportunities for estate planning, allow significant assets to be shielded from creditors in bankruptcy, and even enable the wealthy to gain access to social security benefits.
To address these activities, the law is being changed to require accumulation funds to allocate superannuation contributions, and fully vest these amounts, to the member’s account.
The Government has also acted to strengthen the prudential standards that apply to funds that offer defined benefit arrangements including pensions to ensure that these funds have the capacity to provide these benefits. These funds will be required to have at least 50 defined benefit members.
Small funds will continue to have the flexibility to offer to their members account-based pensions such as allocated pensions and the new market-linked income stream.
Small funds will also be able to provide defined benefit pensions where these are purchased through a life company.
The changes will not impact on existing defined benefit funds or existing funds paying a defined benefit pension.
These measures will take effect from tonight, and ensure that taxation concessions given to superannuation are used to provide genuine retirement incomes.
Previous: Strategies for addressing issues
© Commonwealth of Australia 2005
ISBN 0 642 74275 8