The government has announced its much-anticipated measures aimed at bringing in that hallowed surplus, so how has the nation’s superannuation system fared?
According to an official statement from Superannuation Minister Bill Shorten, new proposals have been announced in the Mid-Year Economic and Fiscal Outlook which will prevent super accounts from being eroded by fees and charges, lower operating costs and improve tax certainty.
Key among the proposals are changes to the way in which lost super will be treated, with Shorten announcing that new proposals in this area are estimated to improve the budget position by $675.2m over the forward estimates period.
Claiming that there is currently around $17bn sitting in 3.4m lost accounts in superannuation funds, Shorten has announced that “new treasury analysis shows the government can do more to prevent small accounts being eroded by fees and charges without a member’s awareness”.
He added that the government will implement the following reforms “to preserve the value of lost member accounts in the superannuation system”:
The account balance threshold below which inactive accounts, and accounts of uncontactable members, are required to be transferred to the ATO will be increased from $200 to $2,000.
Interest will be paid at a rate equivalent to CPI inflation from 1 July 2013 on all lost superannuation accounts reclaimed from the ATO.
The period of inactivity before an account of an unidentifiable member is required to be transferred to the ATO will be reduced from five years to 12 months.
Shorten announced that the reforms to the transfer of lost accounts to the ATO will take effect from 31 December 2012, with the ATO using its data matching resources to match these lost accounts with members.
“The Government will consult further on additional ways to facilitate this process of reuniting members with their lost accounts,” he added.
“Individuals can reclaim superannuation accounts transferred to the ATO at any time, however no form of interest is currently paid when they are reclaimed”.
“The introduction of interest at CPI means that not only will these small lost accounts no longer be eaten up by fees and charges, but they’ll actually retain their value in real terms when they’re re-united with the lost member.”
The reforms will also help to reduce the number of superannuation accounts that have unidentifiable members by reducing the period of time that a super fund can hold the account of an unidentifiable member, claimed Shorten.
He added that this will encourage funds to collect sufficient information to identify members during the period when contributions are being made.
In terms of improving the nation’s bottom line and delivering that surplus, Shorten stated that changes to the way lost super is treated are estimated to improve the budget position by $675.2m over the forward estimates period.
The ATO will receive $62.8m over the forward estimates to implement these changes and will also administer $37m in interest payments associated with reclaimed funds.
Other proposals, as outlined in Shorten’s statement, included:
Bringing the super industry online: Manual processing of superannuation transactions currently cost between $5 to $10 per transaction. It is estimated that after SuperStream is implemented, processing costs will be between 5 to 15 cents per transaction. These savings will flow to members in the form of lower fees and charges.
Reducing the superannuation industry levy: “The Superannuation Supervisory levy will be reduced by $38.2 million over the next six years, commencing with a 10.4% reduction commencing in 2013-14. The reduction in the levy is as a result of savings in the ATO’s administration of SuperStream.
Reforming the SMSF levy: The ATO is responsible for regulating the rapidly growing and diverse SMSF sector and has advised the Government that the levy isn’t fully covering its costs. This means that people who don’t have an SMSF currently have to pay for some of the costs of regulating them, said Shorten. The levy will be increased from $191 to $259 per annum from 2013-14 onwards to ensure SMSFs pay the full cost of regulating their sector.
Greater certainty for superannuation fund mergers: Currently, the tax laws prevent members from manipulating a better tax outcome by choosing to draw down their superannuation benefits from different tax components, said Shorten. It is not appropriate that this integrity rule should apply where the movement of a member’s benefits is due to circumstances outside their control, like the case of merging superannuation funds.
WP
Wealth Professional
Indices:
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