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| October 2006 | Enquiries/Feedback
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| This issue of Directions for participating employers covers a number of Government changes and proposals that will affect your business and how you provide super for your employees.
Changes that are already in place Choice of fund and State awards Employees of a constitutional corporation (typically a company incorporated under the Corporations Act) that makes Superannuation Guarantee (SG) contributions under a State award can now choose the superannuation fund for those contributions. Before 1 July 2006, these contributions had to be made to the fund nominated in the State award. If this change applies to your staff, you will need to offer choice to any State-award employees joining you after 1 July 2006. You must give them a standard choice form within 28 days after they start work with you. You must also provide a standard choice form to any existing State-award employees who request a form.
Government changes to the Superannuation Guarantee law provide some relief from penalties in cases where an employer pays SG contributions to a super fund shortly after the quarterly cut off date. If an employer is late making a contribution, but makes it before they lodge their quarterly SG statement, the contribution can be used to reduce the amount of SG charge the employer may incur. As part of these changes the Government has extended the due dates for lodgement of the quarterly statements to the 28 th day of the month following the cut off date for contributions.
Proposals from 1 July 2007 Employers can claim full tax deduction for all contributions The proposed abolition of age-based limits for deductible contributions and full tax deduction for all contributions is good news for employers. Under current tax rules, employers lose the tax deduction on employer contributions (including salary sacrifice) that are above the age-based limits, or if the employee for whom the contribution is made is over age 70 and the contributions were not required under an Award. The Government has proposed to replace the age-based limits from 1 July 2007 with one limit of $50,000 per person per annum, up to age 75. These contributions will be taxed at 15% and contributions above the limit will effectively be taxed at the top marginal tax rate (plus Medicare levy). Employers will be able to claim a full deduction for all contributions and the additional tax will be charged to the employee. Specifically, an additional 31.5% will be levied on top of the original 15% paid by the fund. The employee will be able to elect for the fund to release money to pay the tax. Self-employed contributions will be treated the same as those paid by an employer for the benefit of an employee. Transitional arrangements will apply until 30 June 2012 for individuals who are over 50 years of age. For these individuals, concessional contributions of up to $100,000 each year will be permitted without breaching the contribution limit. No more rollovers for employer ETPs The Government’s proposals will affect employer-paid Eligible Termination Payments in a number of ways, including:
Transitional rules apply to employer ETPs that are specified in existing employment contracts as at 9 May 2006, provided payment is made before 1 July 2012. It has always been important for members to advise their super fund of their Tax File Number (TFN), and it will become even more important if proposed changes become law. Where a fund does not hold a member’s TFN, before-tax (ie employer/salary sacrifice) contributions above $1,000 in a year will be taxed at the top marginal rate (plus Medicare levy). This threshold will not apply to accounts opened after 1 July 2007. Subsequent provision of the TFN (within four years) will result in the Tax Office refunding the additional tax to the fund. Superannuation funds will not be able to accept after-tax contributions for or on behalf of a member whose TFN has not been provided to the fund. All future provision of TFNs by employees to employers will be deemed to be for superannuation purposes as well, and the employer must provide the TFN to the fund within 14 days. The Government’s Budget proposals to abolish Reasonable Benefit Limits and to remove benefits tax for people aged 60 or over do not impact directly on your business. But they may affect how individuals plan for their financial future, such as continuing at work until at least age 60 rather than taking early retirement. In any event, you’ll probably see your employees taking a much greater interest in their superannuation arrangements.
Aon Master Trust news The new introduction to the Aon Master Trust brochures and Product Disclosure Statements are now available. The brochure is a great way for you to introduce your employees to their new super fund – if you haven’t already received a supply of brochures, please contact your Client Relationship Manager. Once your new employees are ‘signed up’ we’ll send them a welcome kit including their PDS and any forms they need. Transaction reports and 2006 benefit statements
Housekeeping reminders When you send us your contributions, please send us a contributions summary and schedule (on the website or call us for a copy). It gives us the information we need to allocate contributions to members’ account. If we don’t receive it, we’ll have to return the contributions to you. Please advise us of any new members as soon as possible after they start working with you – this is particularly important where insurance underwriting is required for the member. Let us know about exiting members too – if they want to take out an insurance continuation option, they’ll only have a short amount of time to do so. For feedback, questions or more information…
Disclaimer The information in this document is general in nature. Your personal objectives, needs or general situations were not taken into account when preparing this information. You should consider the appropriateness of any general advice before acting on it, having regard to your own objectives, financial situation and needs. If the information relates to a financial product, you should obtain and consider the relevant Product Disclosure Statement before making any decision to purchase that financial product. Depending on the terms of the particular Plan, the Trustee may receive remuneration in respect of the superannuation interests that it issues. For providing personal advice that results in the issue of an interest in the Aon Master Trust, Aon Consulting Pty Limited may receive remuneration from the Trustee. Employees and directors of Aon Consulting Pty Limited are remunerated by way of salary, but may receive bonuses based on the quality and amount of services provided. This document has been prepared by Aon Consulting Pty
Limited (ABN 48 002 288 646, AFSL 236667) a related body corporate of
the trustee of the Aon Master Trust (RSE R1000566), Aon Superannuation
Pty Limited (AFSL 237465, RSE L0000437). This is a relationship that might
reasonably be expected to be capable of influencing Aon Consulting Pty
Limited when the company provides financial product advice to clients
in respect of the Aon Master Trust. |
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