1. Significant Taxation Reforms to Superannuation Presenters: Shayne Carter, Director, Greenwoods & Freehills Graham Warren, Tax Consultant, Greenwoods & Freehills Michael Vrisakis, Partner, Freehills

2. “The beauty is in the detail” Le Corbusier

3. The Detail Tax Laws Amendment (Simplified Superannuation) Bill 2006 Superannuation (Excess Concessional Contributions Tax) Bill 2006 Superannuation (Excess Non-Concessional Contributions Tax) Bill 2006 Superannuation (Excess Untaxed Roll-Over Amounts Tax) Bill 2006

4. The Detail cont’d Superannuation (Departing Australia Superannuation Payments Tax) Bill 2006 Superannuation (Self Managed Superannuation Funds) Supervisory Levy Amendment Bill 2006 Superannuation Legislation Amendment (Simplification) Bill 2007 Income Tax Amendment Bill 2007

5. The Detail cont’d Income Tax (Former Complying Superannuation Funds) Amendment Bill 2007 Income tax (Former Non-Resident Superannuation Funds) Amendment Bill 2007 Income Tax Rates Amendment (Superannuation) Bill 2007

6. More to come Income Tax Regulations –Defined Benefit; notional taxed contributions –Superannuation annuity Remedial amendments – particularly in relation to income streams

7. Order of presentation Shayne Carter Contribution limits Income streams Termination payments Transfer from non-resident funds Graham Warren TFNs Notices of deduction

8. Order of presentation cont’d Shayne Carter Section 279D death benefits Recent amendments/consequential changes Michael Vrisakis Associated legal issues

9. Existing rules Contributions – Current Rules Age based limits under 35 $15,260 35 to 49$42,385 50 and over$105,113 Limits applied on arm’s length employer basis

10. New Contribution Rules Concessional contribution limits Non-concessional contribution limits

11. Concessional contributions Contribution made to complying fund Taxable component of a directed termination payment Notional taxed contributions Allocations within fund

12. Non-concessional Contributions Non deductible personal contributions Excess concessional contributions

13. Concessional Contributions – New Rules From 1 July 2007 Annual $50,000 contribution per person (15% tax levied on the fund) above $50,000 (15% + 31.5% levied on the individual) Excess concessional contributions count towards non concessional limits

14. Contributions: Transitional A transitional period is available for those 50 and over

15. Defined Benefits Special rules to determine application of concessional limits to defined benefit funds Calculate notional taxed contributions Regulations to specify method

16. Defined Benefits Continued Concession available (amounts deemed to not exceed concessional contributions limit) where; –D.B. interest held since 5 September 2006 –Broadly no substantive rule changes

17. Non-concessional Contributions $150,000 annual limit on undeducted contributions made on or after 1 July 2007 Up to $450,000 every three years for people age < 65 Excessive contributions taxed at 46.5%

18. Transitional Provisions – Non Concessional Contributions Special rules apply to non concessional contributions made before 1 July 2007 Broadly $1,000,000 available between 9 May 2006 and 30 June 2007 Ambit expanded to include non deductible employer contributions

19. Exceeding the cap Where have exceeded $1M cap member can apply to ATO to withdraw (10 May 2006 – 6 December 2006)

20. Transitional Provisions: Relief Transitional release authority mechanism Person may make application to Commissioner before 1/7/07 Commissioner has no regard to contributions post 6/12/06

21. Release Authority Person may give transitional release authority to a super provider that holds a super interest for the person within 21 days of receipt of form Super provider has 30 days to respond

22. Excess Payments; Taxation Section 304–15 purportedly makes benefits paid pursuant to a release authority non assessable non exempt May be prudent to have paid after 30 June 2007

23. Termination Payments Directed termination payments Most payments upon cessation of employment cannot be rolled over Can transfer directed termination payments Relates to 9 May 2006 entitlement to payments upon cessation of employment

24. Pensions – Where are we? Current rules Different types of pension annuities Annuities common law non ETP annuities common law ETP annuities SISR (non complying) annuities SISR complying annuities

25. Pensions: Where are we? cont’d Pensions Common law pensions SISR pensions

26. Pensions: Where are we? cont’d Pensions/Annuities: Current Rules Non ETP annuities Deductible amount … s.27H No rebate ETP annuities/ pensions from complying funds Deductible amount …s.27H Rebates

27. New Rules What has gone? Division 17 rebates ETP provisions (except s.27H) What is new? Exemption on super annuities > 60 Rebate 55 – 60 Tax free amount Transitional rules

28. Transitional Rules Commencement before 1 July 2007 Deductible amount proxy for tax free amount until: commutation death 60

29. Transitional Rules: Tax free amount Commutation UUPP + pre 83 Issues

30. Rollovers Commutation of super annuity

31. Income Streams Non ETP: Rebate x Deductible  Complying (e.g. new account based): –Exempt >60 –55–60 rebatable –Deductible amount/Tax free amount 

32. ETP Common Law Rebate? Exemption? Deductible amount  ETP SISR (Non complying) Rebate? Exemption? Deductible amount 

33. Significant Taxation Reforms to Superannuation Presenter: Graham Warren, Tax Consultant, Greenwoods & Freehills

34. No TFN tax 46.5% tax on ‘no TFN contributions income’ Tax on fund: self assess in ITR Applies to Div 295-C assessable contribution if TFN not quoted to fund by year end Exception if pre-1 July 2007 account and contributions equal or less than [$1,000] Tax offset to recoup tax if TFN quoted in succeeding 3 years –interest if employer failed to pass on TFN

35. Passing TFN onto fund If quote TFN to payer and payer makes super contribution then payer authorised to pass TFN onto fund: s.202DHA If quote to employer from 1 July 2007 then employer who makes contribution is required to pass TFN onto fund: s.229C(1)(a) SIS Act –Previously additional prerequisite to pass on is that TFN quoted to employer for super purposes

36. Rejection of member contributions if no TFN Fund must not accept member contributions (ie not employer contributions) if no TFN –Exception if self employed and give NOD, structured injury settlement, sm. bus. CGT, SG, small acct, Govt co-contribution –Position of excess concessional contrib. If fund does accept then must refund within 30 days less: (a) fall in value of product and (b) administration costs (but not commission)

37. No TFN tax - issues Getting TFNs before 1 July 2007: ATO help Recognising contributions to reject –unallocated contributions –transfer from foreign fund, change in NOD –[fund contributions, eg from refund of fee] Deducting expected tax from benefits TFN provided within following 3 years: –delay in crediting account until ITR –if member left fund or fund wound up

38. Self-employed: Notice of Deduction (s.290-180) Give valid notice in approved form before lodge ITR and before end of following year. Can vary downward during this time, or later if deduction disallowed Variation not effective if no longer member of fund, fund no longer holds contribution or already begun income stream based on contribution Non-conc. contrib. if deduction disallowed

39. Anti Detriment Deduction Former s.279D Background Formulaic approach (EM) New Provisions Application of new concepts to formulaic approach? Can we apply formulaic approach?

40. Transfers from non-resident funds Old Rules otherwise assessable transfer of assessable amount

41. Transfers from non-resident funds New Rules otherwise assessable transfer of assessable amount non concessional contributions

42. Recent Changes Transitional arrangements – substituted accounting periods Tax exempt directed termination payments Super Guarantee opt out

43. Super Simplification - Legal Issues Long Live the Compliance Clause! Michael Vrisakis Partner, Freehills

44. Contributions need for information collection in applications and/or under trust deed ascertaining whether employer or personal (viz no acceptance rule if no TFN) ascertaining age of personal members (viz over $150k if more than 65)

45. Contributions (cont’d) quotation of TFN by employer quotation of TFN by members making personal contributions

46. Trust Deed provisions of trust deed to allow for tax to be calculated at member level (viz no TFN tax) provisions for calculation of tax-free component consider “stasis” position: do not have relevant information and place in “holding” account

47. consider “mistake” position: where wrong TFN has been provided or status of contributions is wrong; are contributions void ab initio? (see below) ability to deduct tax from other interests held by member? ability to be indemnified by member or employer when incorrect tax deducted (viz taxed payments generally, no TFN payments)

48. ability to credit tax offsets obtained (viz TFNs quoted subsequently or employer does not pass on TFN) use of a tax reserve? payments of refunds to former members (trust deed permits and SIS?)

49. Information to be given - specifically no TFN exists persons have reached their limit on concessional or non-concessional contributions notification of pre-July 1983 component death benefit nominations where not to dependant

50. application of choice of law to new pensions/payments from 1 July disclosure of consequences of no TFN being quoted no ability to elect the withdrawal of taxable components is there best interests duty to protect member from themselves?

51. Information to be given - generally What to tell new investors: section 1013D? material reasonable investor would expect to be informed about? what information can be assumed to be within knowledge of reasonable person? what information, if any, can be put on the website?

52. what information can be disclosed, given the state of legislation? when to disclose; on or prior to 1 July 2007?

53. what to tell existing investors? same information? use SPDS?

54. JUST WHEN YOU THOUGHT IT WAS SAFE TO GET BACK INTO THE WATER!

55. SIS Changes new SIS regulations reduction of accrued benefits? contribution changes (viz return of contributions) consequential amendments APRA view on rollovers and transfers Changes to portability

56. Consequential changes bankruptcy repercussions (with no RBLs) benefit design and planning (eg paying death benefits to dependant/spouse up to pension RBL) what about binding nominations to this effect?

57. How best to manage? probably via a new improved Compliance Clause some existing clauses may do the trick others will not need to contemplate some new twists and turns!

58. www.gf.com.auwww.freehills.com