Making superannuation simpler
The Government has released a proposed plan — A plan to simplify and streamline superannuation — which includes proposals to sweep away the current tax complexities faced by retirees.
The taxation of superannuation benefits is extremely complicated. Retirees cannot readily understand how their benefits will be taxed. This undermines confidence in the retirement income system.
The Regulation Taskforce recommended that the Government give high priority to simplifying the superannuation tax rules.
Under the plan, benefits paid to retirees aged 60 or above from a taxed fund would be exempt from tax. Benefits paid by untaxed funds (mainly to public servants) would continue to be taxed but at a lower rate. Up to 100,000 retirees a year would benefit from 2007‑08.
The preservation age would not change. People would be able to take their benefits before age 60, although they would be taxed under new simplified rules.
Tax exempt benefits would mean people pay less tax on their work income if they are also drawing on their
superannuation. This creates greater incentives to continue to work.
Reasonable benefit limits would be abolished.
People would no longer be forced to take their superannuation but would be able to take their benefits when they need them.
The current age based contribution limits would be replaced with a streamlined system.
These proposals would deliver a retirement income system which is easier for 10 million Australians to understand, rewards additional savings and creates incentives to work.
No tax on benefits will make superannuation easier to understand
9 2006‑07 Budget Overview