Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon Peter Costello MP)General outline and financial impact
Abolition of surcharge
This Bill abolishes the surcharge payable on individuals' surchargeable contributions and relevant termination payments, with effect from 1 July 2005.
Assessments of superannuation contributions and termination payments surcharge will not be issued in respect of surchargeable contributions or termination payments made or received in the 2005-06 or later financial years.
Assessments of surcharge relating to surchargeable contributions or termination payments made or received in the 2004-05 or previous financial years will continue to be issued and payable. Where a surcharge debt account has been kept for a member, this account will remain payable and continue to accrue interest debits as appropriate.
As a result, the surcharge legislation is not being repealed. The legislation is still required to remain in force to allow the Commissioner of Taxation to continue to issue assessments for the 2004-05 or previous financial years and to collect outstanding surcharge liabilities, including debts that remain within surcharge debt accounts.
This Bill boosts the superannuation savings of affected individuals, provides incentives for individuals to make additional voluntary savings through the superannuation system and simplifies the operation of the superannuation system.
Date of effect: 1 July 2005.
Proposal announced: This measure was announced in the 2005-06 Budget and was also outlined in the Treasurer's Press Release No. 041 of 10 May 2005, Abolishing the superannuation surcharge.
Financial impact: This measure is expected to result in a cost to revenue of $650 million in 2006-07, $875 million in 2007-08, and $990 million in 2008-09.
Compliance cost impact: Nil.
Summary of regulation impact statement
Impact:
In the medium term there may be some benefits to superannuation providers through a reduction in reporting requirements and workflows associated with processing assessments. There are also expected to be some savings for taxpayers who may have previously sought financial advice about the superannuation surcharge and its implications for their retirement savings.
Main points:
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- Superannuation providers will still be required to report, as they currently do, for the 2004-05 or earlier financial years and process assessments received from the Australian Taxation Office for these years.
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- There will be no difference in the debt account requirements faced by superannuation providers who are required to maintain a debt account for a member, that is, unfunded defined benefit schemes.
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- Whilst superannuation providers will no longer be required to report (for surcharge purposes) for the 2005-06 or later financial years, much of this reporting is still required for the Government superannuation co-contribution scheme.
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- A lower number of assessments (including amended assessments) will be required to be processed by superannuation providers. This will start to occur in the 2006-07 and later financial years.
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- It is expected that there would be a reduction in the demand from taxpayers seeking financial advice about the superannuation surcharge and its implications for their retirement savings.