The Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) included a range of announcements, see some below.
The most significant outcome is that income from superannuation pension assets will continue to be tax-exempt after the death of the member until the benefit has been paid by the fund. (see below)
There has also been a SMSF levy reform. Payment of the SMSF levy will be brought forward so that it is levied and collected in the same year of the income. This will ensure consistency with APRA regulated funds, which pay the Superannuation Supervisory Levy in the same financial years it is levied. This change will be phased in over the 2013/14 and 2014/15 years. The levy will also be increased form $191 to $259 pa from 2013/14.
Reduction in Baby Bonus. From 1 July 2013, the Baby Bonus payment for a second and subsequent child will reduce to $3,000 from $5,000. The bonus of $5,000 will continue to apply for the first child.
Expecting parents should consider both the Baby Bonus and Paid Parental Leave scheme to determine which is the most appropriate for their circumstances and eligibility. See Department of Human Services calculator
More certainty for pensions on death
Effective 1 July 2012, legislation will be amended to allow the income from superannuation pension assets to continue to be tax-exempt after the death of the member up until the death benefit is paid from the fund. This will include gains made on the disposal of assets prior to the death benefit being paid.
This measure will provide greater certainty regarding the taxation of super pensions when a pension member dies, as the ATO’s view in draft Tax Ruling TR 2011/D3 was that a pension ceased upon the death of the member.
The amendment also means existing strategies for super death benefits remain valid, however, they should still be reviewed on an ongoing basis to ensure they remain appropriate for the client circumstances.
Note: Other existing legislative requirements, such as the death benefit being paid as soon as practicable, will continue to apply to ensure that the measure is not abused.
Reform of lost member account transfers
To preserve the value of lost member accounts and ensure more accounts are reunited with their owner, with effect from 31 December 2012:
• The account balance threshold below which inactive and lost accounts are required to be transferred to the ATO will increase from $200 to $2,000.
• The inactivity period before an unidentified account is transferred to the ATO will be reduced from 5 years to 12 months, and
• Interest at a rate equivalent to CPY from 1 July 2013 will be paid on all super accounts reclaimed from the ATO.
Removal of rebate on lifetime health cover loading
The lifetime health loading is an additional 2% that is payable on a person’s private health insurance premium if they join after their 31st Birthday. Effective 1 July 2013, the loading will not be included when the private health insurance rebate is determined. This will effectively increase the premiums payable by those people required to pay the loading.
Private Health Insurance Rebate – indexing the Government contribution
Effective 1 July 2014, the Government’s contribution to private health insurance will be determined using commercial premiums as at 1 April 2013 and indexed annually to the lesser of CPI and the actual increase in commercial premiums.
As the lower of the two indexation rates is used, this measure may flow through as higher costs for health fund managers.
Fringe Benefits Tax
Removal of concessional treatment of “in-house” fringe benefits if accessed through a salary sacrifice Arrangement.
The concessional FBT treatment for in-house fringe benefits will be removed if they are accessed by way of a salary sacrifice arrangement. This measure will apply from 22 October 2012 for salary sacrifice arrangements entered into from its announcement on 22 October 2012, and from 1 April 2014 for salary sacrifice arrangements entered into prior to its announcement on 22 October 2012.
Monthly PAYG instalments for large companies
Tax instalments for large companies will be better aligned with their income and trading conditions by requiring companies to make Pay As You Go (PAYG) income tax instalments monthly, rather than quarterly.
This will also align large companies’ PAYG instalments with their GST payments. This reform will be phased in over three years, with companies moving to monthly PAYG instalments:
• from 1 January 2014 for companies with a turnover of $1b or more (around 350 companies)
• from 1 January 2015 for companies with a turnover of $100m or more (around 2,500 companies), and
• from 1 January 2016 for companies with a turnover of $20m or more (around 10,500 companies).
To discuss your tax and accounting requirements speak with our accountants