Federal Budget May 2011: At a super glance

On 10 May 2011, Federal Treasurer Mr Wayne Swan released the 2011/2012 Federal Budget.

Although Mr Swan promoted the package of documents as delivering jobs and spreading the benefits of the mining boom to more Australians, the May 2011 Budget also delivered several superannuation measures including:

• Excess contributions tax relief. From 1 July 2011, individuals who breach the concessional contributions cap by up to $10,000 can request that these excess contributions be refunded to them. You can only make this request if you have breached the concessional caps for the first time. See article Excess contributions tax: Leniency for first offenders for more detail.
• Minimum pension payment relief for 2011/2012 year. The modified extension of payment relief means that the minimum payment amounts for individuals receiving account-based pensions will be 75% of the normal requirements. For example, an individual aged 65 must withdraw 3.75% of his account balance for the 2011/2012 year, rather than 5% under the regular minimum pension payment rules. See article What a relief! Minimum pension payments reduced by 25% for 2011/2012 year for more detail.
• 20% hike in SMSF ATO supervisory levy. The ATO supervisory levy will jump from $150 to $180 from the 2010/2011 lodgement year to cover: “the introduction of a new administrative penalty framework, registration of fund auditors subject to competency and independence standards, improved data collection and improvements to the self managed superannuation fund registration process.” See article SMSFs: 20% jump in ATO supervisory levy for more detail.
• Over-50s concessional contributions cap. The over-50s concessional contributions cap is to be ‘indexed’ rather than having it remain at $50,000 for perpetuity as was originally intended when the Government announced the policy last year (as part of its response to the Henry Tax Review). See article Contributions cap for over-50s to be ‘indexed’… if that’s what you call it for more detail.
• An extended freeze on the indexation of the co-contribution income thresholds. Yet again, the Federal Government has frozen the income thresholds for the co-contribution. The freeze that is in place for the 2010/2011 and 2011/2012 financial years will now be extended to the 2012/2013 year. What are the odds they’ll freeze the thresholds for the following year as well? I explain what this means for super fund members in an article I wrote when explaining last year’s announcement about the threshold freeze, and in our co-contributions guide (see articles It’s official: Co-contribution cuts hurt middle Australia, and women and Cashing in on the co-contribution rules (2010/2011 year)).
• Greater use of TFNs. From 1 July 2011, the Government permits superannuation fund trustees and retirement savings account (RSA) providers to make greater use of tax file numbers (TFNs) to locate member accounts and to help with consolidating multiple member accounts. 
• Focus on phoenix activity to save SG. From 1 July 2011, the Government will strengthen the tax laws to counter fraudulent phoenix activity, which involves “a company intentionally accumulating debts to improve cash flow or wealth and then liquidating to avoid paying the debt. The business is then continued as another corporate entity, controlled by the same person or group and free of their previous debts and liabilities”. The director penalty regime will be extended to make directors personally liable for unpaid Superannuation Guarantee amounts.
• Disclosure of super contribution payments. From 1 July 2012, employers must report on employee payslips the amount of superannuation actually paid into their super accounts; and employees and employers will receive quarterly notification from their superannuation fund if regular payments cease. 
• Instalment warrants. With effect for income tax assessments from the 2007/2008 year onwards, the Government will extend the look-through treatment of instalment warrants for income tax purposes. This measure will extend look-through treatment beyond single exchange traded securities to instalment warrants and receipts over direct and indirect interests in listed securities, as well as unlisted securities in widely held entities and bundles of these assets. This will “confirm the practice of treating an investor in an instalment warrant or instalment receipt over specified assets as the owner of the security for income tax purposes. As a result, there will be no capital gains tax applicable at the time the last instalment is paid for instalment warrants over these types of assets.”
• Extension of temporary loss relief for fund mergers. The Government extends the temporary loss relief for complying superannuation fund mergers by three months, from 30 June 2011 until 30 September 2011, to provide additional time for mergers in progress to be completed. 
• Trading stock exception for CGT. Effective from 7.30pm 10 May 2011, the Government removes the trading stock exception to the ‘capital gains tax (CGT) primary code rule’ for complying superannuation entities for specified assets. This measure ensures gains or losses on specified assets (primarily shares, units in a trust and land) are subject to CGT, consistent with CGT being the primary code for taxing gains and losses of complying superannuation entities. According to the Government, a small number of complying superannuation entities are seeking to treat shares as trading stock, which enables them to deduct losses on shares against income other than capital gains. Assets held or accounted for as trading stock before the May 2011 Federal Budget are unaffected.

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