RDFWA Camaraderie Excerpts

The Federal Budget last month presaged some significant changes to Superannuation to apply from 1 July 2007. Most readers would be aware that there will be changes but the actual impact of the Government's proposals on our retirement pay will not be definitively known for some time. COMSUPER and other government agencies such as Defence and Centrelink have not yet issued any advice on how this will affect superannuants, but they have recently attended Treasury briefings on the changes and further advice should be available soon. Keep in mind that these changes remain only proposals at this stage.

Details of these proposed new arrangements, as announced by the Federal Treasurer in his Budget speech, can be found on the Treasury website and in a booklet available from the Treasury. Details of where you can obtain this information are at the end of this article.

The Government has invited public submissions on these proposals by 9 August and the RDFWA has commenced preparation of a substantial submission. We will be liaising closely with other parties such as the RSL and the Superannuated Commonwealth Officers' Association (SCOA) in developing our submission, although I must stress that our submission mall be made 'm our name. Any RDFWA members who would like to contribute to our submission are invited to send their thoughts to our National Office by mail or email, noting the short time scale.

Public Sector Superannuation Schemes like the CSS, PSS, MSBS and DFRDB are either primarily or totally unfunded, with pension payments coming from consolidated revenue, rather than a superannuation fund which has already been taxed. Because this money has never been taxed, it does not qualify to be totally tax free to the over 60 year olds from 1 July 2007. From an equity perspective this is not right, as pensions that have been subjected to a 15% tax in the past are now able to be exempted from taxes that could have been as high as 31.5%, yet public sector pensions that have not suffered the 15% tax in the past will have to pay taxes of between 0 and 46.5%.

To make this more equitable, the government proposes to introduce a 10% tax offset from 1 July 2007, to these untaxed pensions, for persons 60 years of age and over. This offset, when coupled with the increase in tax thresholds, will reduce the tax payable.

It is proposed that pension payments would continue to be included in assessable income and taxed at marginal rates. However, pension payments (including where the pension commenced before 1 July 2007) would be eligible for the 10% taxation offset ‑ currently they are not eligible for any offset.

The change to the personal rates of tax will apply from 1 July 2006, with the 10% offset not applying until 1 July 2007. What this means is that tax will reduce twice. as can be seen from the table below. The figures below also include the low income tax offset:

Gross Pension	Current Net	Net from 1 July 2006	Net from 1 July 2007
$20,000	$17,835	$18,400	$20.000
$30,000	$24,690	$25,600	$28,600
$40,000	$31,540	$32,050	$36,050

These figures assume that the untaxed pension is the only income. There would also be a change to the average tax rate as follows:

Disclaimer: This information is indicative only and is based on information available on the internet which we and SCOA understand to be accurate. Note that the above table assumes the gross pension is the only income. Other tax benefits may also apply such as those applicable to senior Australians.

Until further information on these matters is known, and as the issues are somewhat complex and emotional, anyone who wants a deeper understanding of the proposed superannuation changes should read the Treasury Pamphlet (A Plan to Simplify and Streamline Superannuation) which was issued as part of the Budget. Chapter 8 deals with 'untaxed' schemes and the Appendix illustrates a fuller range of before and after dollar amounts. The pamphlet runs to 84 pages so please do not ask our National Office for copies! It can be obtained from

Work on our Superannuation submission is our top national priority at present but it does not mean that other retirement benefit issues will be neglected. We will continue, to press our case for pension indexation and income splitting at the appropriate time but these must take a lower precedence at present. One of the many actions arising from our recent National AGM is to update and simplify our National Policy Register, and I will report on progress in the next issue of Camaraderie.

I also thank SCOA for their permission to use some of the information presented above.