Additional tax for those with more than $3m in super (Div 296 tax)
A Bill to give effect to the Government’s changes was introduced to Parliament just before the summer break. This Bill has now been referred to a Senate committee which is due to report by 19 April 2024. And we still await the release of draft Regulations to determine how defined benefit interests will be valued.
Whilst material change isn’t expected at this stage, there’s still plenty of time for tweaks to be made before the proposed start date of 1 July 2025.
Non-arm’s length expenses (NALE)
After years of uncertainty, the Government’s position on NALE is now relatively clear – it’s not a position we like, but we at least (mostly) know where we stand. It is hoped the next few months will bring us clarity on the remaining NALE issues – for example, whether trustees can mitigate potential NALE issues by treating asset improvements as a contribution to the fund. The Bill to limit the tax penalty for general expenditure shortfalls is expected to pass Parliament in the next sitting. We’ll then need to wait for the ATO to issue any updates to LCR 2021/2 and finalise its draft amendments to TR 2010/1 on contributions.
Contribution caps
Whilst we now know the general transfer balance cap will remain at $1.9m on 1 July 2024 (the December quarter CPI figure wasn’t high enough to increase the cap to $2m), we’ll need to wait until 22 February to see whether the contribution caps will increase to $30,000 (concessional) and $120,000 (non-concessional) for 2024/25. Unlike the transfer balance cap, indexation of the contribution caps is based on wages growth so an increase is much more likely.
Other measures
The Government has also proposed a number of changes over the last few years for which we have not yet seen draft legislation, including:
- the two year amnesty to allow those drawing lifetime, life expectancy or market linked pensions to exit their arrangements (there is however a current solution for some pensioners with larger balances – get in touch if you have clients in this situation)
- the relaxation of the residency rules for SMSFs – whilst announced by the former Government, the current Government did confirm their commitment to this measure in the 2022-23 Federal Budget
- the requirement for employers to pay their employees’ superannuation contributions at the same time as their salary and wages (“payday super”) from 1 July 2026 – consultation on this measure has commenced
- amending the transfer balance cap rules so individuals with capped defined benefit income streams are not adversely impacted in the event of a merger of super funds or a successor fund transfer
- reforming our enduring power of attorney laws to achieve greater national consistency – consultation on this measure has commenced
- increasing the amount of a Commonwealth penalty unit (eg for breaches of the super law) by 5.4% from $313 to $330
It’s certainly going to be an interesting year ahead.
