House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Employment and Workplace Relations and Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)

General outline and financial impact

Superannuation concessional contributions cap

Schedule 1 to the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Bill 2013 amends the Income Tax Assessment Act 1997 and the Income Tax (Transitional Provisions) Act 1997 to increase the concessional contributions cap temporarily to $35,000 for the 2013-14 financial year for individuals aged 60 years and over, and to $35,000 for the 2014-15 financial year and later financial years for individuals aged 50 years and over. The temporary cap will cease when the general cap indexes to $35,000.

Date of effect: This measure applies to the 2013-14 financial year and later financial years.

Proposal announced: This measure was announced in the Deputy Prime Minister and Treasurer's and the Minister for Financial Services and Superannuation's Joint Media Release No. 039 of 5 April 2013.

Financial impact: This measure has the following revenue implications:

Human rights implications: This Schedule is compatible with human rights. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.16 to 1.23.

Compliance cost impact: Nil.

Low income superannuation contribution: technical amendments

Schedule 2 to the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Bill 2013 amends the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 in order to make technical changes to ensure the low income superannuation contribution operates effectively.

Date of effect: The amendments made by this Schedule apply to the 2012-13 income year and later income years.

Proposal announced: This measure was announced (in part) in the Minister for Financial Services and Superannuation's Media Release No. 160 of 29 November 2011.

Financial impact: These amendments will have the following expenditure outlay implications (in accrual terms):

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 2, paragraphs 2.65 to 2.68.

Compliance cost impact: Low.

Sustaining the superannuation contribution concession

Schedule 3 to the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Bill 2013 (this Bill) amends the income tax and superannuation law and the Taxation Administration Act 1953 to reduce the tax concession for concessionally taxed superannuation contributions of very high income earners by 15 per cent. The Superannuation (Sustaining the Contribution Concession) Imposition Bill 2013 contains the mechanism by which the tax concession is reduced.

Schedule 4 to this Bill also makes consequential amendments to legislation concerning some of the Commonwealth defined benefit superannuation plans where members of those plans are affected by the reduction in the tax concession for concessionally taxed superannuation contributions.

Date of effect: This measure applies to concessionally taxed superannuation contributions for the 2012-13 income year and later income years.

Proposal announced: This measure was announced in the Minister for Financial Services and Superannuation's Media Release No. 024 of 8 May 2012.

Financial impact: This measure is estimated to have a gain to revenue over the forward estimates period of $1,747 million comprising:

Human rights implications: Schedule 3 and 4 and the Superannuation (Sustaining the Contribution Concession) Imposition Bill 2013 does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 6, paragraphs 6.50 to 6.54.

Compliance cost impact: The reduction in the tax concession for concessionally taxed superannuation contributions of very high income earners will result in some transitional and some ongoing compliance costs for individuals and superannuation providers. It is estimated that these changes will impact approximately 1.2 per cent of individuals contributing to superannuation in 2012-13. The Office of Best Practice Regulation has advised that a Regulation Impact Statement is not required.