Superannuation

There were no changes to the contribution caps or to the taxing of contributions or benefits. There are two reforms set out below. The latter one provides some relaxation of the "penalty regime" applying to those individuals whose contributions exceed the concessional (employer or deductible self-employed persons) cap of $25,000 (or $50,000 for persons aged 50 and over). The disappointing aspect is that both lack any retrospectivity and do not address the problem of an inadvertent breach of the cap.

Stronger Super–Self Managed Super Fund Reforms

To boost Government and public confidence in the self managed superannuation fund sector, a range of measures will be introduced to improve the operation, efficiency and integrity of the largest sector in the superannuation system. The measures include a new administrative penalty framework, registration of fund auditors subject to competency and independence standards, improved data collection and improvements to the self managed superannuation fund registration process.

From 2010-11 to 2014-15, the Australian Taxation Office (ATO) will be provided with $40.2 million and Australia Securities and Investments Commission with $8.4 million, for implementation of the measures. This will be funded by a $30 increase to the self managed superannuation fund levy, from $150 to $180, with effect from 2010-11, and by collection of fund auditor registration fees.

Reform of Excess Contribution regime

From 1 July 2011, individuals who breach concessional contribution caps by up to $10,000 can request the excess amount be refunded on a once only basis. Personal tax rates will apply in lieu of the potentially higher excess contributions tax rate, particularly where the excess contribution which is deemed to also be a non-concessional contribution causes a breach of the non-concessional cap.

The Government will consult with the superannuation industry on the implementation of this measure, and that will be an opportunity for sensible refinement of a regime which is seen by many as being unfair. The lack of retrospectivity must be a concern for both industry and the ATO.

The golden rule continues to be "make sure you understand your contribution caps and track your superannuation regularly". That will not always be easy and you will need to work with your employer as the timing of contributions is critical, particularly around year end.