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2004-2005
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TAX LAWS AMENDMENT (SUPERANNUATION CONTRIBUTIONS SPLITTING) BILL 2005
EXPLANATORY MEMORANDUM
(Circulated by authority of the
Treasurer, the Hon Peter Costello MP)
Table of contents
Glossary 1
General outline and financial impact 3
Chapter 1 Splitting of superannuation contributions 7
Chapter 2 Regulation impact statement 13
Index 25
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|Commissioner |Commissioner of Taxation |
|ETP |eligible termination payment |
|ITAA 1936 |Income Tax Assessment Act |
| |1936 |
General outline and financial impact
Splitting of superannuation contributions
The Tax Laws Amendment (Superannuation Contributions Splitting)
Bill 2005 amends the Income Tax Assessment Act 1936 (ITAA 1936).
The amendments provide for the tax consequences of the Government's
election commitment to allow members to split their superannuation
contributions with their spouse.
The splitting of superannuation contributions will assist families
to maximise the benefits available in superannuation and provide an
avenue for spouses to share in superannuation benefits. It will be
of particular benefit to low income or non-working spouses by
allowing them to have superannuation assets under their own control
and have their own income in retirement.
It will provide single income couples with access to two eligible
termination payment (ETP) low-rate thresholds and two reasonable
benefit limits in a similar way to dual-income families.
The Government has selected a voluntary, 'annual split' model for
the splitting of contributions. That is, after the end of the
financial year members of participating superannuation entities
could request that contributions made in the previous year be split
with their spouse.
The exact details of how this will operate will be specified in
amendments to the Superannuation Industry (Supervision)
Regulations 1994, Retirement Savings Account Regulations 1997 and
Income Tax Regulations 1936. Where a split of contributions is
made in accordance with those regulations then the tax consequences
will be as set out in this Bill. The basic principle of the
taxation treatment of contributions splitting will be:
. contributions in respect of a member (the splitting
spouse) that are split in favour of their spouse (the
receiving spouse) will be paid to another fund or
transferred to an account within the existing fund for the
receiving spouse. This payment or transfer will be
considered to be an ETP roll-over for the receiving
spouse.
Date of effect: The amendments will apply from Royal Assent, but
will not take practical effect until regulations are made
specifying the detail of how and from when the contributions-
splitting regime will operate. These regulations are expected to
provide that contributions made on or after 1 January 2006 will be
able to be split.
Proposal announced: This measure was originally announced in the
Government's policy statement A Better Superannuation System on
5 November 2001. The Government subsequently recommitted to this
policy in its policy statement Super for All and Understanding
Money on 6 October 2004.
Financial impact: This measure will have a cost to revenue as
follows:
|2005-06 |2006-07 |2007-08 |2008-09 |
|Nil |-$1.2 |-$4.0 |-$4.7 |
| |million |million |million |
Compliance cost impact: Superannuation providers may incur
additional administrative costs in providing their members with the
ability to split superannuation contributions.
Summary of regulation impact statement
Regulation impact on business
Impact: This measure will assist families to maximise the benefits
available in superannuation and provide an avenue for spouses to
share superannuation benefits. This is particularly important for
families with one spouse working in the home or receiving a low
income.
There is no impact on employers, and employers' superannuation
guarantee obligations will not change as a result of this measure.
However, superannuation providers may incur administration and
system development costs, where they decide to offer splitting.
Main points:
. Members of eligible funds will be able to split both
personal and employer contributions with their spouse,
including compulsory superannuation guarantee
contributions.
. For participating members, contributions made on behalf of
one spouse (the splitting spouse) would be transferred to
a separate interest in the fund or to another
superannuation provider for the benefit of the other
spouse (the receiving spouse). Existing superannuation
benefits will not be eligible for splitting.
Chapter 1
Splitting of superannuation contributions
Outline of chapter
1.1 Schedule 1 to this Bill amends the Income Tax Assessment
Act 1936 (ITAA 1936) to provide for the taxation consequences of
the Government's election commitment to allow members of
accumulation funds to split their superannuation contributions with
their spouse. The amendments will provide:
. for a new payment called a 'contributions-splitting
eligible termination payment' (ETP) which will arise when
a member's contributions are split in accordance with
regulations. Amendments to the Superannuation Industry
(Supervision) Regulations 1994, the Retirement Savings
Account Regulations 1997 and the Income Tax
Regulations 1936 will provide the framework for the
operation of contributions splitting. The amended
regulations will also work in conjunction with this Bill
to define under what circumstances an amount paid or
transferred to an account is to be considered to be a
contributions splitting ETP. Broadly it is intended that
the regulations will provide that if a member (the
splitting spouse) requests that part of their
contributions be split in favour of their spouse (the
receiving spouse) and the split is in accordance with any
rules on contributions splitting specified in the
regulations then the payment or transfer to give effect
to the split will be considered to be a contributions-
splitting ETP;
. that a contributions-splitting ETP is a qualifying ETP;
. that the payment or transfer of an amount that meets the
definition of a 'contributions-splitting ETP' is to be
considered to be an ETP roll-over;
. for the deeming of a zero day eligible service period
where a contributions-splitting ETP is paid or
transferred;
. for the Commissioner of Taxation (Commissioner) to have
the ability to collect information regarding
contributions-splitting ETPs to assist in the
administration of the measure, if necessary; and
. that a notice of intention to claim a deduction for
eligible superannuation contributions cannot be made to a
superannuation fund if a contributions-splitting
application has been made in respect of those
contributions and has not been rejected. In effect this
means that a notice of an intention to claim a deduction
must be made before a splitting request.
Context of amendments
1.2 Superannuation has traditionally been seen as a means to
encourage savings for the purposes of replacing employment income
following retirement. Therefore, historically, superannuation
contributions have generally only been allowed in respect of
individuals in the workforce.
1.3 The Government's proposal to allow splitting of
superannuation contributions will further build on the Government's
achievements in increasing the accessibility of superannuation. In
particular, the ability to split employer superannuation
contributions will assist couples that cannot afford to make
voluntary contributions. It will also assist spouses that stay
home to care for a family to accumulate their own superannuation.
This measure is expected to benefit women in particular.
1.4 Superannuation contributions splitting will provide:
. low income or non-working spouses with their own
superannuation assets under their own control and their
own income in retirement; and
. single income couples with better access to two ETP low-
rate thresholds and two reasonable benefit limits in a
similar way to dual income families.
1.5 The exact details of how the contribution-splitting regime
will operate will be specified in regulations.
Summary of new law
1.6 Schedule 1 ensures that amounts paid or transferred as a
contributions-splitting ETP to a superannuation account belonging
to a fund member's spouse are treated as a roll-over and therefore
are not taxed as contributions upon receipt in the receiving
spouse's account.
1.7 The Schedule also allows regulations to be made to specify
information that must be provided to the Commissioner where a
contributions-splitting ETP is made. This will allow information
on contributions-splitting ETPs to be collected by the
Commissioner, if necessary.
1.8 Finally, the Schedule prevents a notice of intention to
claim a tax deduction for eligible superannuation contributions
from being lodged with a superannuation fund if a contributions-
splitting application has been made. In effect this means that a
notice of an intention to claim a deduction must be made before a
splitting request. However, in the event that a contributions-
splitting application was made and subsequently rejected, a notice
of intention to claim a deduction can still be lodged.
Comparison of key features of new law and current law
|New law |Current law |
|Eligible members will be|Members are unable to |
|able, in circumstances |split personal or |
|to be specified in |employer superannuation |
|regulations, to split |contributions with their|
|both personal and |spouse, including |
|employer superannuation |compulsory |
|contributions with their|superannuation guarantee|
|spouse, including |contributions. |
|compulsory | |
|superannuation guarantee| |
|contributions. | |
|This Bill provides for | |
|the taxation | |
|consequences of such a | |
|split occurring. | |
|In particular a | |
|contributions split in | |
|favour of a spouse will | |
|be treated as an ETP | |
|roll-over for that | |
|spouse. The eligible | |
|service period attaching| |
|to that ETP will be zero| |
|days. | |
|The Commissioner will | |
|have the ability to | |
|collect information | |
|regarding | |
|contributions-splitting | |
|ETPs. | |
|Amendments to the | |
|provisions regarding | |
|deductions for | |
|superannuation | |
|contributions by | |
|eligible persons will | |
|prevent the lodging of a| |
|notice of intent to | |
|claim a deduction where | |
|a | |
|contributions-splitting | |
|application has been | |
|lodged and not rejected.| |
|In effect this means | |
|that a notice of an | |
|intention to claim a | |
|deduction must be made | |
|before a splitting | |
|request. | |
Detailed explanation of new law
Amounts that are moved to a spouse under contributions splitting will be
ETP roll-overs
1.9 Item 1 of Schedule 1 inserts a definition of a
contributions-splitting ETP into the ITAA 1936. The term is
defined as an amount paid to a superannuation fund, a life
assurance company (for the purposes of paying into a 'deferred
annuity') or approved deposit fund, or transferred within a
superannuation fund for the benefit of the taxpayer (in this case
the spouse of the member whose contributions are being split) where
the payment or transfer occurs in accordance with the relevant
regulations. [Schedule 1, item 1]
1.10 Item 2 of Schedule 1 makes a technical drafting amendment
to improve the wording of the ETP definition. [Schedule 1, item 2]
1.11 The definition of 'eligible service period' in
subsection 27A(1) is amended to provide that the ETP of a
contributions-splitting ETP is deemed to be zero days.
Consequently this provision makes it clear that a contributions-
splitting ETP will never have any pre-July 1983 component.
[Schedule 1, item 3]
1.12 Items 4 to 7 of Schedule 1 make technical drafting
amendments to improve the wording of the ETP definition.
[Schedule 1, items 4 to 7]
1.13 Paragraph (b) of the definition of an ETP in
subsection 27A(1) is amended to make it clear that a contributions-
splitting ETP will not be considered an ETP under this paragraph.
Rather, a contributions-splitting ETP will be an ETP by virtue of
new paragraph (bb). [Schedule 1, items 8 and 9]
1.14 Items 10 to 14 of Schedule 1 make technical drafting
amendments to improve the wording of the ETP definition. [Schedule
1, items 10 to 14]
1.15 An amendment is made to subsection 27A(12) to make it clear
that a contributions-splitting ETP will always be a qualifying ETP.
[Schedule 1, item 15]
1.16 Classifying the contribution-splitting ETP as a
qualifying ETP will facilitate the rolling over of the ETP.
Taxpayers can only elect to roll-over qualifying ETPs.
Taxation components of a contributions-splitting ETP
1.17 The relevant concessional tax rate for an ETP depends on
whether or not the ETP was paid from a taxed source or an untaxed
source. Generally a payment from a taxed superannuation fund will
contain a taxed element. Therefore the table in subsection 27AB(1)
is amended to include an amount that is a contributions-splitting
ETP as having a taxed element to the extent that it is paid from a
taxed superannuation fund. [Schedule 1, item 16]
1.18 An amendment is made to the ETP roll-over provisions
in section 27D. This allows for regulations to be made to specify
that a contributions-splitting ETP will be considered a roll-over
and to require other details (such as the taxation components of
the contributions-splitting ETP) relevant to that roll-over to be
prescribed. [Schedule 1, item 17]
Reporting to the Commissioner
1.19 An entity which makes a contributions-splitting ETP must
provide the Commissioner with a statement setting out details of
the payment, if required by the regulations. [Schedule 1, item 18]
Notices required to claim a taxation deduction not able to be given for
contributions that have been split
1.20 Subsection 82AAS(1) is amended to include a reference
to the definition of a contributions-splitting ETP as contained in
subsection 27A(1) of the ITAA 1936. [Schedule 1, item 19]
1.21 A new paragraph is inserted into subsections 82AAT(1B)
and (1CC) to ensure that notices of intention to claim a deduction
for superannuation contributions by eligible persons can not be
lodged in respect of contributions which are already the subject of
a contributions-splitting application. This avoids administrative
complexity and prevents a claim for a tax deduction where the
contributions in question have already been paid, transferred or
allotted to a superannuation account of the spouse of the fund
member. [Schedule 1, items 20 and 22]
1.22 The effect of items 20 and 22 is that if the taxpayer (the
splitting spouse) wishes to both claim a tax deduction under
section 82AAT and split some or all of a year's contributions with
their spouse, then they must first lodge the necessary notice to
claim the deduction before requesting that the contributions be
split.
1.23 Items 21 and 23 provide that the definition of
contributions-splitting application, as used in items 20 and 22,
means an application designated as a contributions-splitting
application in the regulations. [Schedule 1, items 21 and 23]
Chapter 2
Regulation impact statement
Policy objective
2.1 The objective of this measure is to broaden the
accessibility of superannuation to individuals who are outside the
paid workforce. This measure is expected to benefit women in
particular. Specifically this measure will:
. provide low income spouses with their own superannuation
assets in their own name and under their own control; and
. give single income families access to two eligible
termination payment (ETP) tax-free thresholds and
two reasonable benefit limits.
Implementation options
2.2 Given the Government's election commitment that the
administrative burden will not fall on employers, this regulation
impact statement does not examine options that involve splitting of
superannuation contributions by the employer.
2.3 Four principal ways of implementing the Government's
superannuation contributions-splitting proposal have been
identified:
. Prospective split - at the request of a member, the
member's superannuation provider would be required to
split each future superannuation contribution received on
behalf of the member.
. Annual split - after the end of the financial year and at
the request of a member, the member's superannuation
provider would be required to split contributions received
during the previous year.
. Joint accounts - couples could open a joint superannuation
account or retirement savings account and each spouse
would hold a 50 per cent interest in contributions and
investment returns credited to the account.
. Benefits split - members could split benefits accrued
after commencement at any time, including following
retirement.
Costs and benefits
2.4 The following paragraphs describe each of the four options
including their impact on stakeholders. References to
superannuation providers include both superannuation funds and
retirement savings account providers.
Option 1: prospective split
2.5 A prospective split would involve members notifying their
superannuation provider of an intention to split each future
contribution received by the provider. The superannuation provider
would then split each contribution received on behalf of that
member.
Impact assessment - benefits
Members and their spouses
2.6 Couples gain the tax advantages and other benefits that
flow from splitting superannuation contributions, including:
. providing the low income or non-working spouse with their
own superannuation assets under their own control (thereby
allowing them to take an interest in their retirement
savings by, for example, choosing their own superannuation
fund or investment strategy) and their own income in
retirement; and
. access to two ETP low-rate thresholds and two reasonable
benefit limits.
Superannuation providers
2.7 The ability to split superannuation contributions may
encourage new or increased contributions, hence potentially
increasing funds under management.
Employers
2.8 This option does not impose additional requirements on
employers in making superannuation contributions.
Government
2.9 This option furthers the Government's superannuation and
retirement policy objectives.
Impact assessment - costs
Members and their spouses
2.10 As couples would require at least two superannuation
accounts under this option, couples may incur separate account
management fees on each account (while these vary significantly, a
typical amount might be around $150 per annum, excluding investment
management fees. Note however, some funds specify fees as a dollar
amount while others specify a percentage of assets, so fees could
be higher or lower). However, in many cases, the receiving spouse
would already have an existing superannuation account into which
the split contributions could be made. The splitting spouse may
also be levied with service fees by the provider affecting the
split.
2.11 The splitting spouse would need to provide their
superannuation provider with details of their spouse's
superannuation account.
Superannuation providers
2.12 This option would impose administration and systems
development costs on superannuation providers, especially where the
receiving spouse's account is with a different provider or if the
member is in receipt of frequent contributions (eg, fortnightly).
These costs may be significant, although they have not been able to
be quantified. Superannuation providers would not be forced to
offer contributions splitting and hence could avoid these costs if
they choose not to offer contribution splitting.
2.13 Under a regime of quarterly superannuation guarantee
contributions, there would be at least four contributions per annum
and therefore at least four times of the year when contributions
would be split for participating members.
2.14 Superannuation providers may also need to take steps to
establish that the spouse is bona fide and check account details.
Employers
2.15 This option does not impose additional requirements on
employers in making superannuation contributions.
Government
2.16 This option is of a similar cost to Option 2 over the
forward estimates period, though its prospective nature involves a
small bring forward of the revenue impact. As such, its actual
cost over the forward estimates period is marginally higher than
that of Option 2, and broadly in line with the costs of Option 3.
Option 2: annual split
2.17 Following the end of the financial year and at the request
of a member, a superannuation provider would split contributions
received during the previous year. This option simplifies Option 1
by requiring superannuation providers to effect a split only once
per year and by allowing members to notify their provider of their
intention to split contributions after the relevant contributions
have been made.
Impact assessment - benefits
Members and their spouses
2.18 Couples gain the tax advantages and other benefits that
flow from splitting superannuation contributions, including:
. providing the low income or non-working spouse with their
own superannuation assets under their own control (thereby
allowing them to take an interest in their retirement
savings by, for example, choosing their own superannuation
fund or investment strategy) and their own income in
retirement; and
. access to two ETP low-rate thresholds and two reasonable
benefit limits.
Superannuation providers
2.19 The ability to split superannuation contributions may
encourage new or increased contributions, hence potentially
increasing funds under management.
Employers
2.20 This option does not impose additional requirements on
employers in making superannuation contributions.
Government
2.21 This option furthers the Government's superannuation and
retirement policy objectives.
Impact assessment - costs
Members and their spouses
2.22 As couples would require at least two superannuation
accounts under this option, couples may incur separate account
management fees on each account (while these vary significantly, a
typical amount might be around $150 per annum, excluding investment
management fees. Note however, some funds specify fees as a dollar
amount while other's specify a percentage of assets, so fees could
be higher or lower). However, in many cases, the receiving spouse
would already have an existing superannuation account into which
the split contributions could be made. The splitting spouse may
also be levied with service fees by the provider affecting the
split. The cost may be lower if the receiving spouse's account
were in the same fund.
2.23 However, the ongoing administration costs incurred by
superannuation providers are expected to be lower under this option
than under Option 1, and hence the fees paid by splitting members
are also expected to be lower.
Superannuation providers
2.24 This option would impose administration and system
development costs on superannuation providers. These costs have not
been able to be quantified. However, because providers would
affect a split only once per year, costs are expected to be lower
under this option than under Option 1. Superannuation providers
would not be forced to offer contributions splitting and hence
could avoid these costs if they choose not to offer contribution
splitting.
2.25 Superannuation providers may also need to take steps to
establish that the spouse is bona fide and check account details.
Employers
2.26 This option does not impose additional requirements on
employers in making superannuation contributions.
Government
2.27 This option has an estimated cost to taxation revenue of
$9.9 million from commencement to 30 June 2009.
Option 3: joint accounts
2.28 A member who wished to split superannuation contributions
would open a new account, with their existing superannuation
provider, to be held jointly in their own and their spouse's names.
At the request of the splitting spouse, the superannuation
provider would deposit all (or part) of the splitting spouse's
contributions into this account.
2.29 Each spouse would hold a 50 per cent interest over
contributions and investment returns credited to the account. Each
spouse could transfer their accumulated share of the benefit from
the joint account to an account in their name. Alternatively,
payment of a superannuation benefit could be made directly to the
relevant spouse, providing that spouse had satisfied a condition of
release.
Impact assessment - benefits
Members and their spouses
2.30 Couples gain the tax advantages and other benefits that
flow from splitting superannuation contributions, including:
. providing the low income or non-working spouse with their
own superannuation assets and their own income in
retirement; and
. access to two ETP low-rate thresholds and two reasonable
benefit limits.
Superannuation providers
2.31 The ability to split superannuation contributions may
encourage new or increased contributions, hence potentially
increasing funds under management.
Employers
2.32 This option does not impose additional requirements on
employers in making superannuation contributions.
Government
2.33 This option furthers the Government's superannuation and
retirement policy objectives.
Impact assessment - costs
Members and their spouses
2.34 Couples would be required to open a new account under this
option. If each spouse already had their own superannuation
account then couples may maintain three accounts between them - one
in the name of each spouse, and the joint account.
2.35 Maintaining an additional superannuation account and paying
an extra set of account-keeping fees is expected to reduce the
retirement income benefits of splitting, particularly for low
income couples.
2.36 Furthermore, owing to joint control of the accounts, the
low income or non-working spouse may have reduced control over
their superannuation assets relative to Options 1 and 2.
Superannuation providers
2.37 This option would impose significant system development
costs on providers. The systems development costs are expected be
significantly higher than the other options, as the superannuation
system is currently built on the basis of the individual being the
unit, rather than a couple. The costs to providers associated with
this option have not been able to be quantified. Superannuation
providers would not be forced to offer contributions splitting and
hence could avoid these costs if they choose not to offer
contribution splitting.
2.38 However, because providers would not be required to split
regular contributions, ongoing costs for those providers who offer
splitting may be lower than under Options 1 and 2.
2.39 Superannuation providers may levy a fee at the time of the
split to recoup administration costs incurred by the provider.
2.40 Superannuation providers may also need to take steps to
establish that the spouse is bona fide.
Employers
2.41 This option does not impose additional requirements on
employers in making superannuation contributions.
Government
2.42 This option would result in complex changes to the tax and
superannuation legislation and regulations.
2.43 This option is of a similar cost to Option 2 over the
forward estimates period, though its prospective nature involves a
small bring forward of the revenue impact. As such, its actual
cost over the forward estimates period is marginally higher than
that of Option 2, and broadly in line with the costs of Option 1.
Option 4: benefit splitting
2.44 Under this option members would be able to split benefits
accrued after commencement of the measure at any time, including at
retirement. To reduce the administrative burden on providers (and
eliminate the need for providers to track contributions and
earnings accrued after commencement of the measure), a simplified
calculation of benefits eligible for splitting could be used. In
principle, eligible splitting benefits could be the total benefit
multiplied by the proportion of time spent in employment after
commencement of the measure, relative to total time in employment
(a member's eligible service period could be used for this
purpose).
2.45 If the receiving spouse was aged less than 65 and had not
satisfied a condition of release at the time of retirement of the
splitting spouse, the receiving spouse's benefit would be rolled
into their own account and preserved until they retire.
Impact assessment - benefits
Members and their spouses
2.46 Couples gain the tax advantages and other benefits that
flow from splitting superannuation contributions, including:
. providing the low income or non-working spouse with their
own income in retirement; and
. access to two ETP low-rate thresholds and two reasonable
benefit limits.
2.47 The ability to split eligible superannuation contributions
at any time would encourage spouses to split after retirement when
the splitting spouse could calculate the precise amount of
superannuation to transfer to the receiving spouse to minimise the
couple's combined tax liability.
2.48 By splitting after retirement, couples could avoid the need
to open a superannuation account in the name of the receiving
spouse.
Superannuation providers
2.49 The implementation costs of this option are smaller than
Options 1, 2 and 3.
Employers
2.50 This option does not impose additional requirements on
employers in making superannuation contributions.
Government
2.51 This option does not meet all of the Government's
superannuation and retirement policy objectives associated with
this measure.
Impact assessment - costs
Members and their spouses
2.52 This option provides reduced economic independence to the
receiving spouse. The receiving spouse would not have
superannuation assets under their direct control during the
accumulation phase potentially missing out on cost-effective death
and disability insurance. Furthermore, the receiving spouse may
not have access to their benefit until after their spouse retired.
2.53 The splitting spouse may be levied with service fees by
their provider at the time of the split.
Superannuation providers
2.54 This option would impose systems development and
administration costs on superannuation providers. As providers
would be splitting benefits rather than contributions, the systems
development costs would likely be the lowest of all the options,
although they have not been able to be quantified. Providers
already have the operational means to split superannuation benefits
reflecting recent amendments to the Family Law Act 1975.
Superannuation providers would not be forced to offer splitting and
hence could avoid these costs if they choose not to offer
splitting.
2.55 It is expected that providers would only split balances
once, probably following the retirement of the splitting spouse.
2.56 Providers may levy a fee at the time of the split to recoup
administration costs incurred by the fund.
2.57 Superannuation providers may also need to take steps to
establish that the spouse is bona fide.
Employers
2.58 This option does not impose additional requirements on
employers in making superannuation contributions.
Government
2.59 This option does not meet the Government's objective of
providing non-working spouses with superannuation assets under
their control.
2.60 This option broadens the scope of the Government's policy
announcement and focuses more narrowly on facilitating the ability
of fund members to minimise their combined tax liability.
Accordingly, the cost to revenue of this option would be
significantly higher than for Options 1, 2 and 3.
2.61 In the long-term, the cost to revenue reflects the ETP tax
benefits of splitting as well as lower income taxation in
retirement. The increasing proportion of benefits that can be
split over time is an important factor increasing long-term costs
well in excess of those incurred under the other options.
Consultation
2.62 The Government has conducted a range of consultation
activities in relation to this policy. In July 2002 the Government
issued a consultation paper for public comment, which outlined the
policy proposal in detail, including the first three options
included in this paper. The Government subsequently consulted on a
draft Bill and on two sets of draft regulations.
2.63 Many key industry stakeholders participated in the
consultation process, including the Association of Superannuation
Funds of Australia, the Investment and Financial Services
Association, CPA Australia, the Financial Planning Association, the
Institute of Chartered Accountants in Australia and the Institute
of Actuaries of Australia. Submissions were also received from
numerous other entities and individuals.
2.64 The inclusion of Option 4 in the preceding regulation
impact statement reflects the desire of some parts of industry to
pursue benefits splitting rather than contributions splitting.
2.65 Mixed views were presented by those who responded to the
Government's consultation paper on which of Options 1 or 2 would
impose the smaller costs on funds, although Option 2 was more
likely to be favoured than Option 1. Of these two options,
superannuation providers in favour of Option 1 were possibly the
more highly automated providers while providers that preferred
batch processing were more likely to favour Option 2. There was
very little support for Option 3 (joint accounts) and a general
view that it raised some complex legal issues.
Recommendation and reasons
2.66 Options 1 and 2 best meet the Government's policy
objectives. However, these options do impose costs on funds.
Option 2 is expected to impose smaller costs on superannuation
providers who choose to offer contributions splitting than
Option 1, and therefore is the preferred option.
2.67 Option 3 is the least preferred option (of those that meet
the Government's objectives). Option 3 would require fundamental
change to the superannuation system, imposing costs on
superannuation providers and the Government, and provide the lowest
benefit to couples, because couples may be required to maintain
three accounts.
2.68 Option 4 does not fully meet the Government's objectives
and comes at a higher cost to Government revenue. While Option 4
maximises the tax benefit for couples, it does not provide the
receiving spouse with their own superannuation during the
accumulation phase and the broader benefits that can bring.
Index
Schedule 1: Superannuation contributions splitting
|Bill reference |Paragraph |
| |number |
|Item 1 |1.9 |
|Item 2 |1.10 |
|Item 3 |1.11 |
|Items 4 to 7 |1.12 |
|Items 8 and 9 |1.13 |
|Items 10 to 14 |1.14 |
|Item 15 |1.15 |
|Item 16 |1.17 |
|Item 17 |1.18 |
|Item 18 |1.19 |
|Item 19 |1.20 |
|Items 20 and 22 |1.21 |
|Items 21 and 23 |1.23 |