w Removing the work test for superannuation contributions before age 65
From July 1, 2004, the work test on who can contribute to superannuation will be removed for anyone under the age of 65. This also will simplify an important part of the superannuation system.
w Making it easier for individuals in the transition to retirement
A person below age 65 must retire or leave employment before they can access their superannuation benefits. This rule may lead to people deciding to retire prematurely just so they can access their superannuation. In recognition of this, people who have not retired will be able to access their superannuation as a non-commutable income stream once they reach their superannuation preservation age.
w Simplifying the work test rules for those aged over 65
From July 1, 2004 the Government will change the contribution and cashing rules for people aged 65 to 74 to an annual work test so these rules are consistent with current and future work trends. The Government will consult with the industry and community on an appropriate work test.
w Increased choice and competition in the income streams market
The Government will extend ‘complying’ status to new market-linked income stream products which require an orderly draw-down of capital over a person’s life expectancy. These products will be non-commutable and will restrict payments to a set proportion of the account balance. The higher pension reasonable benefit limit and a 50 per cent assets test exemption will apply to these products purchased on or after September 20, 2004. This will allow industry time to develop and have these products on the market.
w Change to assets test exemption for complying income streams
To better balance the objectives of the age pension with the need for incentives to purchase particular income streams, the Government will reduce the current 100 per cent exemption for purchased complying income streams to a 50 per cent assets test exemption for products purchased on or after September 20, 2004. Complying income streams purchased before this date will not be affected.
w Superannuation benefits for people over 75
People aged 75 and over cannot contribute to superannuation unless an award requires it. However, a person who works at least 30 hours a week can keep their benefits in a superannuation fund past this age. This means they may not have to access their accumulated superannuation benefits at all during their lives.
The current rule could allow superannuation to be used specifically for estate planning rather than retirement income purposes, which is inconsistent with the purpose of providing tax concessions to superannuation. To ensure people do access their superannuation, the law will be amended so superannuation funds start paying benefits to a person, as soon as practicable after they reach age 75 either as a lump sum or an income stream. This will not apply to people over 75 who still receive superannuation contributions under an industrial award. This measure will commence on July 1, 2004.
w Preservation of rolled-over employer eligible termination payments
A person generally cannot access their superannuation benefits unless they have reached their preservation age and have retired. Since July 1, 1999, all new contributions to superannuation have been preserved to ensure superannuation savings are used for their intended purpose of supporting retirement income. The Government will remove this anomaly so that all employer eligible termination payments which are rolled over into superannuation from July 1, 2004 are preserved.
w Simplifying the superannuation guarantee national earnings bases
To ensure all employees are treated in a consistent manner for superannuation guarantee purposes, the Government will remove lower earnings bases making ordinary time earnings the base for determining superannuation guarantee liability for employees.
w Actuarial certificates for account-based income streams.
The Government will remove the requirement for a superannuation fund to obtain an actuarial certificate for assets supporting allocated pensions, and the new complying market-linked pensions from the 2004-05
financial year.
