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Australian Lawyers and Consultants

Backdowns on Superannuation Law Announcements

August-September 2004

The Federal Government passed a new SIS Regulation that defers, by 12 months, the announced restriction on self-managed funds issuing their own complying life pensions. The latter attract the Pension RBL instead of the Lump Sum RBL that applies to allocated pensions. The Federal Budget had announced a prohibition on regulated funds with fewer than 50 members offering such pensions, unless established prior to the date of the Budget announcement. The new operative date is 1 July 2005.

For some people contemplating retirement before 30/06/2005, or turning 65 (even without retirement) before that date, there is now an opportunity to obtain the higher RBL with the imprimatur of the new regulation.

In another retreat, the Australian Tax Office (ATO) by Media Release on 4 August 2004 confirmed that commonly used superannuation strategies to accelerate a lump sum benefit (ETP) payout and then contributing the after-tax money as an undeducted contribution into a self-managed super fund would not attract anti-avoidance provisions. This overrides recent newspaper reports that gave the impression the ATO had a negative view of such arrangements. Additionally, the making of a large undeducted contribution to the super fund before receiving an ETP will not be considered as tax avoidance.

In other good news, the Government on 16 June 2004 released details of the new complying market linked income stream as an alternative to complying life pensions. On the other hand, the assets test exemption for non-commercial income streams will be reduced (as from 20 September 2004) from 100% to only 50%. Earlier on 27 May 2004, the government announced a widening of the class of “dependants” as potential beneficiaries of tax-free superannuation death benefits. This change will require amendment to many trust deeds so contact Baldwins if you want to provide for a person other than the spouse.

For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.

Return to the Australian Tax Law Library or Superannuation Law Page.