House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

General outline and financial impact

Taxation of superannuation payments made to certain persons who have permanently departed Australia

The Taxation Laws Amendment (Superannuation) Bill (No. 1) 2002 amends the ITAA 1936, ITAA 1997, TAA 1953, ITA 1986 and SSAA 1995.

The amendments provide that a special tax will apply to superannuation payments made to persons who have permanently departed Australia, where the payment is made under circumstances specified in the SIS Regulations and RSA Regulations. It is intended that the circumstances specified in the SIS and RSA Regulations will restrict these payments to those made to persons who entered Australia temporarily, on particular classes of visa, and have subsequently left Australia permanently. Similar payments made under the SSAA 1995 or by an exempt public sector superannuation scheme will also be subject to the special taxation arrangements.

Date of effect : The amendments will commence on the later of Royal Assent and Royal Assent of the related Income Tax (Superannuation Payments Withholding Tax) Bill 2002. The amendments will apply to payments made on or after 1 July 2002.

Proposal announced : The measure was foreshadowed in the Government's policy statement A Better Superannuation System on 5 November 2001, and clarified in Minister for Revenue and Assistant Treasurer's Press Release No. C301 of 27 December 2001.

Financial impact : This bill and the Income Tax (Superannuation Payments Withholding Tax) Bill 2002 are expected to result in increased revenue of $70 million in 2002-2003, $110 million in 2003-2004 and $75 million in 2004-2005.

Compliance cost impact : Superannuation fund trustees will have to ensure that the correct tax is withheld from the payments.

Summary of regulation impact statement

Regulation impact on business

Impact : In conjunction with amendments to the SIS and RSA Regulations the measure will reduce ongoing administrative and compliance costs for superannuation funds in maintaining accounts for temporary resident members. Superannuation funds will have to ensure the correct tax is applied to the payments.

Main points :

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Superannuation benefits accessed under the new conditions will be subject to a special tax, which would be withheld by the superannuation fund and remitted to the ATO.

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Superannuation funds will face initial compliance costs associated with updating computer systems to reflect the new condition of release and to withhold the special tax levied on superannuation benefits accessed by departed temporary residents.