Superannuation (Departing Australia Superannuation Payments Tax) Amendment Act (No. 2) 2016

Overview

The Superannuation (Departing Australia Superannuation Payments Tax) Amendment Act (No. 2) 2016, enacted on 2 December 2016 by the Parliament of Australia, amends the Superannuation (Departing Australia Superannuation Payments Tax) Act 2007 to alter the threshold at which departing Australian residents can access their superannuation tax-free. This amendment responds to a perceived gap in ensuring that retirees leaving Australia are not unfairly taxed on their retirement savings. The policy objective of this Act is to adjust the threshold to reflect changes in the cost of living and inflation, ensuring that retirees can access their superannuation without incurring significant tax liabilities. This Act modifies the qualifying condition for tax-free superannuation by reducing the percentage of the total superannuation balance that can be withdrawn tax-free from 95% to 65%.

Scope and Application

The Superannuation (Departing Australia Superannuation Payments Tax) Amendment Act (No. 2) 2016 amends the Superannuation (Departing Australia Superannuation Payments Tax) Act 2007. This Act applies to individuals and entities that are subject to the superannuation tax on departing Australia payments, which primarily concerns superannuation fund members who are leaving Australia permanently and seek to withdraw their superannuation benefits. The legislative amendments affect the threshold percentage for tax-free superannuation payments when leaving Australia, reducing it from 95% to 65%. The changes are applicable on a national level, impacting all jurisdictions within Australia. The Act does not specify exclusions or exemptions, but the amendments are subject to the existing provisions of the Superannuation (Departing Australia Superannuation Payments Tax) Act 2007. The Act came into force on 2 December 2016, with specific provisions outlined in the Schedule to the Act taking effect immediately after the commencement of the Amendment Act. The amendments are precise and do not extend or restrict the application beyond what is stipulated in the Act itself.

Key Provisions

The Superannuation (Departing Australia Superannuation Payments Tax) Amendment Act (No. 2) 2016 amends the Superannuation (Departing Australia Superannuation Payments Tax) Act 2007 by modifying the threshold for tax-free superannuation payments for departing Australians. Specifically, section 5(3) of the original Act has been altered to change the tax-free threshold from 95% to 65% (section 1). This means that superannuation payments made to individuals who leave Australia permanently are now subject to tax if the amount exceeds 65% of their total superannuation benefits. This change effectively lowers the amount that can be withdrawn tax-free when an individual leaves Australia. The primary obligation imposed by the Act is on superannuation funds to calculate and report the amount of superannuation benefits that exceed the new 65% threshold. Funds are required to withhold tax at a rate of 15% on any amount exceeding this threshold, and remit the tax to the Australian Taxation Office (ATO) on behalf of the individual. This requirement ensures that the government receives the appropriate amount of tax from superannuation payments made to departing Australians. Failure to comply with the obligations imposed by the Act can lead to significant penalties. Superannuation funds that fail to withhold and remit tax on amounts exceeding the 65% threshold may be subject to a civil penalty of up to 100% of the tax that should have been withheld and remitted. Additionally, individuals who fail to declare their superannuation benefits correctly may face criminal penalties, including fines and imprisonment. The severity of the penalties underscores the importance of adhering to the requirements set out in the Act to avoid legal repercussions.