Federal public servants can now stay in the Public Sector Superannuation Accumulation Plan after they leave Commonwealth employment.
The budget papers say the change will have no financial implications for the taxpayer, but will give PSSap members the right to keep their super where it is when they change jobs as most other Australians can.
The budget says the move is in line with other efforts to lower the administrative costs borne by members of the PSSap scheme. The measure would also seem to support the government’s intent to increase the mobility of its personnel between the public service and other employers in the private or not-for-profit sectors.
Other superannuation highlights for public servants include:
- Introducing a $1.6 million superannuation transfer balance cap on the total amount of superannuation that an individual can transfer into retirement phase accounts. See Fact Sheet.
- Requiring those with combined incomes and superannuation contributions greater than $250,000 to pay 30 per cent tax on their concessional contributions, up from 15 per cent. This extends the current treatment of people with combined incomes and superannuation contributions over $300,000. See Fact Sheet.
- Lowering the superannuation concessional contributions cap to $25,000 per annum. See Fact Sheet.
- Introducing a $500,000 lifetime cap for non-concessional contributions. See Fact Sheet.
- A number of similar changes will apply to defined benefit superannuation arrangements. See Fact Sheet.
- Removing the tax exemption on earnings of assets supporting Transition to Retirement Income Streams from 1 July 2017 (income streams of individuals over preservation age but not retired). See Fact Sheet.
Defined benefit members to pay their fair share
The budget brings change for members of the older defined benefit and constitutionally protected super schemes that were available to public sector workers in the past.
The aim is to make sure the changes to superannuation tax concessions in the budget apply “broadly commensurately” to members of all types of funds.
The measures include a $500,000 lifetime cap on non-concessional contributions and the reduction of the annual cap on concessional superannuation contributions to $25,000.
From July 1, 2017, the 15% additional high income contributions tax will cut in at $250,000 instead of $300,000. This is known as the Division 293 threshold and applies to members of defined benefit schemes, “subject to current constitutional exemptions” according to fact sheet.
Retirees who receive pensions over $100,000 from unfunded defined benefit schemes and constitutionally protected funds will still be taxed at full marginal rates, but the value of a 10% tax offset available to them will be capped at $10,000 from next July. The aim is “to broadly replicate the effect of the proposed $1.6 million transfer balance cap” that will limit the amount other retirees can transfer from accumulation schemes to tax-free retirement accounts.
Those whose money comes from funded defined benefit schemes will have to pay their full marginal tax rate on 50% of what they receive over $100,000 per annum. Treasury estimates this will affect less than 1% of retired defined benefit fund members.
Concessional contributions into accumulation schemes from members of defined benefit schemes will still be allowed, but the $25,000 cap on these will be reduced by the amount of their “notional contributions”.
Non-concessional contributions to defined benefit schemes made since July 1, 2007, will be included in the new $500,000 lifetime cap but do not have to be withdrawn. The fact sheet explains:
“If a member with a defined benefit account exceeds their lifetime non-concessional contributions cap, ongoing contributions to the defined benefit account can continue but they will be required to remove an equivalent amount from any accumulation account on an annual basis if they have one.
“The amount that could be removed from any accumulation account will be limited to the amount of non-concessional contributions made into those accounts after 1 July 2007.”
The document says the government is “mindful” that some people won’t have any non-concessional contributions made since the 2007 cut-off that can be removed and will “consult on options to achieve broadly commensurate treatment for these individuals in an equitable manner” at some point.
It will also consult on ways to avoid “unintended consequences” from the way defined benefit pensions and annuities are valued “for the purpose of aggregating multiple defined benefit and accumulation interests for the transfer balance cap proposal” and “to determine the appropriate treatment of arrangements that have both funded and unfunded components for the transfer balance cap proposal”.