Government changes to superannuation

B2B Editor4 July 2013

Government changes to superannuation

Some good news coming out of the 2013 Federal Budget is some extra red tape for Self Managed Superannuation Funds (SMSF) has been removed providing opportunities for those with tight cash-flows to continue making contributions via off market share transfers.

SMSF Share Transfers

The Government had previously announced that from 1 July 2013 you would not be able to contribute or sell listed shares you own to your SMSF. Instead you would have to sell the shares on the share market, bank the proceeds into your SMSF and then re-purchase the shares on the market.

Legislation going through Parliament this month has had the part detailing the banning of off-market transfers removed. The proposal had originally been announced to commence from 1 July 2012. Lobbying by the industry including RSM Bird Cameron, and opposition by the Coalition, has helped see the proposal initially deferred for a year and now dropped.

The legislation, in its first draft, would have caused SMSF trustees to contravene provisions of the Corporations Act. This was a significant surprise for the Government and eventually resulted in the issue being thrown into the “too hard basket”.

The good news is that from 1 July 2013 SMSF members can continue to transfer shares into their SMSF via off-market transfers provided they are transferred at market value.

Coalition Superannuation Proposals

Due to key superannuation announcements being made ahead of the 2013 Federal Budget, no major measures affecting superannuation were reported in the Budget itself. However in Tony Abbot’s Budget Reply speech, he indicated that he would make changes to superannuation, if elected. Firstly, he intends to discontinue the low income superannuation contribution (LISC).

The LISC is essentially a Government payment of up to $500 made to low income earners’ superannuation funds to offset the contributions tax the fund pays on behalf of the member.

His reason for removing the LISC is that the Minerals Resource Rent Tax is not raising sufficient revenue to fund this measure (as originally intended).

Tony Abbot also announced a proposed change to measures that have been legislated to incrementally increase the superannuation guarantee rate from its current rate of 9% to 12%.

He stated in his Budget Reply that, if elected in September, he would seek to freeze the superannuation guarantee rate at 9.25% for two years.

Michael O Hehir Senior Manager, RSM Bird Cameron