Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon Peter Costello MP)Chapter 1 - Abolition of surcharge
Outline of chapter
1.1 Part 1 of Schedule 1 to this Bill amends the Superannuation Contributions Tax (Assessment and Collection) Act 1997 , the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 and the Termination Payments Tax (Assessment and Collection) Act 1997 to abolish the superannuation contributions and termination payments surcharges for surchargeable contributions and termination payments made or received in the 2005-06 or later financial years.
Context of amendments
1.2 Currently, the superannuation contributions surcharge is payable on an individual's surchargeable contributions where their adjusted income is above a specified amount.
1.3 The termination payments surcharge is also payable on part of certain employment-related termination payments that are not rolled over into a superannuation fund.
1.4 The Government announced in the 2005-06 Budget that it will abolish the surcharge payable on individuals' surchargeable contributions and relevant termination payments, with effect from 1 July 2005.
Summary of new law
1.5 The surcharge will cease to apply to periods after the end of the 2004-05 financial year. As a result the surcharge will not apply in the 2005-06 or later financial years.
Comparison of key features of new law and current law
| New law | Current law |
|---|---|
| The financial years to which the superannuation contributions surcharge applies will be limited to financial years that end before 1 July 2005. | Superannuation contributions surcharge is payable on a member's surchargeable contributions for the financial year that began on 1 July 1996 or a later financial year. |
| A termination payment to which the termination payments surcharge applies will be limited to payments made before 1 July 2005. | Termination payments surcharge is payable on certain termination payments made to or for a taxpayer after 7.30 pm by legal time in the Australian Capital Territory on 20 August 1996. |
Detailed explanation of new law
1.6 Subsection 7(1) of the Superannuation Contributions (Assessment and Collection) Act 1997 and subsection 8(1) of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 will be amended so that the superannuation contributions surcharge will only be payable on surchargeable contributions made by or on behalf of a member in a financial year that began on 1 July 1996 or a later financial year that ends before 1 July 2005. [Schedule 1, Part 1, items 1 and 2]
1.7 Paragraph 7(2)(a) of the Termination Payments Tax (Assessment and Collection) Act 1997 will be amended so that the termination payments surcharge will only be payable on certain termination payments made to or for a taxpayer after 7.30 pm by legal time in the Australian Capital Territory on 20 August 1996 and before 1 July 2005. [Schedule 1, Part 1, item 3]