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

Fairer taxation of excess concessional contributions

The Tax Laws Amendment (Fairer Taxation of Excess Concessional Contributions) Bill 2013 (Bill) amends the Income Tax Assessment Act 1997 and the Taxation Administration Act 1953 to establish a fairer system for the taxation of individuals with concessional contributions in excess of their annual cap. This Bill also allows individuals to elect to release an amount of excess concessional contributions from their superannuation interests. The Superannuation (Excess Concessional Contributions Charge) Bill 2013 imposes a charge on taxpayers who have concessional contributions in excess of their annual cap to ensure that they do not receive an advantage over those taxpayers who do not exceed their annual cap.

Date of effect: These amendments apply in the 2013-14 income year (and the corresponding financial year) and later income (and financial) years.

Proposal announced: This measure was announced in the Deputy Prime Minister and Treasurer and the Minister for Financial Services and Superannuation's joint Media Release No. 020 of 5 April 2013, which included a number of reforms to superannuation.

Financial impact: The measure has a cost to revenue over the forward estimates of $10 million. This reflects that the loss of excess contributions tax revenue is offset by the new excess concessional contributions charge.

Human rights implications: This Bill and the Superannuation (Excess Concessional Contributions Charge) Bill 2013 do not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.97 to 1.107.

Compliance cost impact: This measure will have minor compliance costs for the superannuation industry as superannuation providers are likely to receive a limited number of additional release authorities in respect of their members' interests which they will generally be required to action.

However, the superannuation industry currently has systems in place to process release authorities for excess concessional contributions tax and the existing related refund measure. It is not anticipated that a significant number of individuals will elect to release amounts of their superannuation (through the Australian Taxation Office) from their funds as a result of this measure, as the number of individuals currently using release authorities is low.