Superannuation changes

In 2006 the Federal Government made sweeping legislative changes to the Australian superannuation system.

These changes were aimed at simplifying and streamlining our superannuation system. In particular, they sought to resolve, some tax complexities, enhanced retirement incomes and gave greater flexibility to your superannuation.

The Governments changes affected the entire superannuation spectrum.

Tax free benefits for people aged 60 and over.

Rules for benefits paid to individuals aged 60 and over

Lump sums

From 1 July 2007, all lump sum benefits paid from a taxed source to an individual aged 60 or over will be tax-free. There will be no RBL.

Pensions

All pension payments from a taxed source will be tax free when paid to individuals aged 60 or over. This will also apply to pensions, which commenced before 1 July 2007. There will be no RBL.

Key points:

  • Concessional deductible contributions to superannuation will be limited to $50,000 per person per annum. These contributions will be taxed at 15 per cent.
  • A five year transitional period will apply for people who are aged 50 and above to allow those planning to retire soon to make concessional contributions of $100,000 a year.
  • Employers will be able to claim a full deduction for all contributions to superannuation on behalf of individuals under the age of 75.

The superannuation Guarantee will continue to apply only until age 70.

  • The personal deduction eligibility rule will be simplified by making it consistent with the rule that currently applies for the Government co-contribution.
  • Personal superannuation contributions from an individuals post-tax income (known as undeducted contributions) will continue not to be taxed when contributed and may be eligible for the Government co-contribution (as currently).

These contributions will be limited to $150,000 per annum.

People under age 65 will be able to bring forward two years of contributions and make a larger contribution of $450,000.

Transitional arrangements will apply between 10 May 2006 and 30 June 2007.

  • All contributions limits in the plan (except those related to transitional arrangements) will be indexed in $5000 amounts.

Pension payments

Individuals will be able to choose the amount they take from their pension each year. A minimum amount will be required to ensure that the capital is generally drawn down over time. The minimum pension payments are set out below.

Indicative minimum annual pension payments:

Age

Per cent of account balance

55 - 64

4

65 - 74

5

75 - 84

6

85 - 94

10

95 +

14

These superannuation changes took effect from 1st July 2007.

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Published on January 1-th, 2009 in Insurance
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.
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