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Simplified Super - Broad changes established |
The Government has now released its plan to simplify superannuation. The new rules apply from 1 July 2007. |
The most important change to superannuation is that most super benefits paid to over-60s, whether paid as a lump sum or a pension, will be tax-free. |
For those under 60, the part not tax-exempt will be taxed at a maximum rate of 15 per cent for those 55 or over, and 20 per cent for those under 55. |
One reason for the complexity of the present system is that the law treats different types of pension differently. Under the proposed new rules all pensions will be taxed equally, provided they satisfy proposed new minimum annual payment amounts. |
The new rules are not without hidden cost. From 1 July super funds will normally have to pay out death benefits as a lump sum. If a lump sum is paid to someone who is not a dependant for tax purposes, it will be taxed at 15 per cent, which some categorise as a de facto death duty. |
Tax dependants are spouses, or someone who had an interdependency relationship, or a person's children under 18, not usually the circumstances in the life cycle of a super fund, so benefits will face taxes. |
