Eight significant changes to superannuation have been recently announced and no doubt you will receive more detail in coming months. Here is a brief summary:
- From July 2004, no work test for super contributions under the age of 65. Perhaps this will mean that spouse contributions will disappear. Child contributions will remain.
- Also from July 2004, for people aged at least 65 to under 75, there will be an annual work test. No details on this, but under the old super rules we used to have a work test of "at least 520 hours work per year" which no one could understand and, to "simplify" matters, the government introduced the 10 hours each week rule, which has confused almost everyone for about a decade. It seems we are returning to the old rules.
- Again from July 2004, people over aged 75 will need to begin using their super assets and no super contributions will be allowed except Industrial Award contributions.
- And again from July 2004, rolled over employer ETPs will be preserved. This will be a major disincentive to rollover these benefits. A new strategy decision will be required - rollover and preserve or cash out and pay higher surcharge and have an RBL benefit.
- Allocated pension funds will no longer be required to obtain actuarial certificates. The same will apply for the growth pensions.
- From 20th September 2004, 50% of the purchase price of asset test exempt income stream will be included in the assets test for Centrelink purposes.
- From 1st July 2005, people under the age pension age will be able to access a non-commutable lifetime pension. Our understanding is that this rule is already available for people who terminate with an employer who has contributed to a fund.
- From 1st July 2010 all employers will have to use the same earnings basis for Super Guarantee - that is, Ordinary Time Earnings.
More about these changes in our next edition.
Tony Martin and Grant Hodgins - Directors