RAT Edition No.22 - 7 December 2007

Edition 07/22

7 December 2007

Welcome to this edition of Retirement Income Alert Today. What follows is a brief update on current superannuation and financial planning issues aimed at assisting practitioners.

Headlines

1. Superannuation policy issues announced during or prior to the election campaign
2. ATO updates
3. Training and Development
4. News and Media Releases

1. Superannuation policy issues announced during or prior to the election campaign

Superannuation announcements were made by both the Coalition and Labor parties prior to, and during, the election campaign and are summarised below.

Super Guarantee Late Contributions
This policy which has bipartisan support will amend the law to ensure that employers who made SG contributions to a fund, but did not make them on time, would not be required to pay the contribution twice for the same quarter.

Payment of temporary residents' superannuation to the Australian Government
The former government announced that all future super contributions and balances for temporary residents (other than New Zealand residents) will be required to be paid to the federal government. Employers can elect to pay to the fund or directly to the ATO.

Payment to tax free benefits to the terminally ill
Prior to the election the former government announced it would exempt people with a terminal illness who access their super under the age of 60 - the government would also make lump sum superannuation benefits paid tax-free.

First home saver accounts
Labor announced that low tax first home saver accounts would be available to anyone over 18 years old who are eligible for the first homebuyers grant. A $10,000 (indexed) cap would apply to total contributions each year, $5,000 of which can come from pre-tax contributions and the remainder from post-tax contributions.

Automatic consolidation of lost accounts
Labor's plan included TFN to be used annually in order to automatically transfer lost accounts into a current or last active account. Individuals would have the opportunity to opt out, and automatic consolidation will not apply to defined benefit schemes.

National Rental Affordability Scheme
Labor announced it would offer tax incentives to institutional investors who: build new homes/ units; rent them to certain investors and at 20% below the market rate of equivalent properties in the area. It is anticipated that superannuation funds will become involved in this measure as investors in companies that build the houses/units for rental income rather than as developers and renters of properties directly. This will arise due to the SIS requirement to act on an arms length basis.

Superannuation Clearing House
Labor's plans would be contracted to the private sector, and be used as an option for business' to make the choice of fund simpler and more cost effective. The clearing house would deal with form filing, checking and distribution of contributions to funds.

Other potential measures that were announced included, superannuation guarantee contributions to be based on pre-salary sacrifice salary and wages and a policy that would give same sex couples the same superannuation and taxation rights as heterosexual couples.

The Institute will work with Government on the issues as outlined below to secure the best outcome for Chartered Accountants and the public interest.

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2. ATO updates

Simpler Super - Industry Stakeholder Q and A
This list contains answers to questions raised by the current Simple Super Stakeholder Working Groups. It will be updated weekly on Mondays with answers to questions we have already received and future queries. Where an answer is pending we will provide an estimated response time, which will be reviewed on a weekly basis.

The tax office has confirmed that when considering the proportioning of benefits, the proportion of a benefit is to be calculated to two decimal places, based on the value of the third decimal number. If the third decimal number is greater than or equal to 5 then round up to the nearest whole number otherwise round down to the nearest whole number. Thus 0.005 is rounded up to the next 1 and 0.004 is rounded down. This confirmation from the tax office came about due to a query regarding this example. The tax office's confirmation response will be available on the Industry Stakeholder Q & A information pages through the Superannuation Professionals section of the Tax Office website in the near future.

Instalment warrants - the ATO has released an explanation of the new provisions in relation to instalment warrants.

PAYG payment summaries - From 1 July 2007 there are three new PAYG payment summaries used when employment termination payments, superannuation income streams and superannuation lump sums are paid.

PAYG payment summaries for employers paying ETPs - This payment summary is to be used when employment termination payments are paid.

No TFNs and co-contribution - Funds and Retirement Savings Account (RSA) institutions will not have to return co-contribution payments in respect of member and RSA holder contributions made prior to 1 July 2007 where they do not have the tax file number (TFN) of the member or RSA holder.

The ATO has released the new edition of Superupdate.

ATOID 2007/212 - Transitional redundancy payments. An amount in excess of the tax free amount of a genuine redundancy payment is a transitional termination payment, where the payment is made under an agreement that was in force just before 10 May 2006 and the payment is made before 1 July 2012.

ATOID 2007/213 - Excess Contributions Tax. In this ID the Commissioner has indicated that a new release authority will not be issued when an amended excess contributions tax assessment is issued reducing the assessment.

ATOID 2007/214 - Excess Contributions Tax. In this ID the Commissioner has indicated that a new release authority will not be issued when an amended excess contributions tax assessment is issued increasing the assessment.

SPR 2007/1 Employment Termination Payments (12 Month Rule)

Paragraph 82-130(1)(b) of the Income Tax Assessment Act 1997 does not apply to a late termination payment if the payment is received more than 12 months after the termination of a person's employment because:

(a) legal action was commenced within 12 months of the termination of employment, of which the subject is either or both:

• i) the person's entitlement to the payment;
• ii) the amount of the person's entitlement;

(b) the payment was made by a liquidator, receiver or trustee in bankruptcy of an entity that is otherwise liable to make the payment, where that liquidator, receiver or trustee is appointed no later than 12 months after the termination of employment.

ATOID 2007/205 Assessability of superannuation contributions made in favour of local government councillors. Amounts paid by a local government council in the form of contributions to a complying superannuation fund that are assessable to the fund under section 295-160 of the ITAA 1997, do not represent assessable income of the councillor for the purposes of the ITAA 1997.

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3. Training and Development

Simpler Superannuation Web Cast
Australia is currently undergoing the most significant changes to superannuation in decades. Be prepared by watching Susan Orchard, from the Institute of Chartered Accountants, discuss the implications to taxed funds.

Audit of SMSF DVD
If you were unable to attend the recent sell-out workshops in October/November, don't miss out on this opportunity to view highlights plus added extras at your convenience.

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4. News and Media Releases

APRA has made Modification Declaration 3 of 2007 (MD 3) under the SIS Act and Modification Declaration 1 of 2007 (MD1) under the RSA Act on 19 November 2007 to provide relief to superannuation entities and RSA institutions from the requirement to return government co-contributions within 30 days if a TFN has not been quoted to the superannuation entity or RSA institution.' For more information see Superannuation Legislation.

ASIC has released a report, Overview of decisions on relief applications (June to August 2007), which outlines 'its recent decisions on applications for relief from the corporate finance, financial services and managed investment provisions of the Corporations Act between 1 June and 31 August 2007.' More information, including a link to the report as well as information regarding applying for relief, can be found at IR 07-49 ASIC issues report on relief applications.

A number of company charge forms are now able to be filed online. Instructions on how to lodge the forms, and a list of the charge forms affected by the changes.

Research conducted by ANOP has found that 'nearly nine out of ten Australians surveyed support soft compulsion as a painless and flexible way to boost their super.' Soft compulsion involves employees committing an additional 1% of their wage to super per annum, up to a maximum of 3%. See media release.

ICAA has released a whitepaper, Key observations: A forum on the financial planning industry, which focuses on the predominant issues facing the financial planning sector. More information as well as links to several publications is available.

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For further information on this newsletter, please contact:

Natala Low
Special Interest Coordinator
Ph. 02 9290 5526
Email. super.queries@charteredaccountants.com.au

Disclaimers

This is an initiative of, and has been prepared by the Special Interest Team of the Institute of Chartered Accountants in Australia. While every effort has been made to ensure the accuracy of the information contained therein, neither the Institute nor its employees shall be liable on any grounds whatsoever in respect of decisions or actions taken as a result of using this publication. The information provided is a general guide only and should not be used, relied on or treated as a substitute for specific professional advice or referral to the relevant specific standard.

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