Chapter 3: Tax expenditures

3.6 Income tax benchmark

Retirement savings

Tax expenditures for social security and welfare

C1 Capital gains tax small business retirement exemption

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
270	490	580	350	390	420		440		470
Tax expenditure type:		Exemption				2009 TES code:		C1
Estimate Reliability:		Low
Commencement date:		1997				Expiry date:
Legislative reference:		Subdivision 152-D of the Income Tax Assessment Act 1997

Capital gains arising from the sale of active small business assets are exempt from capital gains tax, up to a lifetime limit of $500,000, where the proceeds of the sale are used for retirement. An eligible small business is one where the net value of assets that the taxpayer and connected entities own is no more than $6 million, or where the aggregated annual turnover is less than $2 million.

C2 Capped taxation rates for lump sum payments for unused recreation and long service leave

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
110	100	140	105	100	95		90		90
Tax expenditure type:		Concessional rate				2009 TES code:		C2
Estimate Reliability:		Medium - High
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Subdivisions 83-A and 83-B of the Income Tax Assessment Act 1997

A maximum tax rate of 30 per cent plus the Medicare levy applies to lump sum payments in lieu of unused long service or annual leave which accrued before 18 August 1993, or which are made in circumstances of bona fide redundancy, invalidity or under an early retirement scheme. All other lump sum payments in respect of unused annual or long service leave which accrued after 18 August 1993 are taxed at individual marginal rates.

C3 Concessional taxation of non-superannuation termination benefits

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
1,400	1,200	1,750	1,500	1,350	1,300		1,250		1,250
Tax expenditure type:		Concessional rate				2009 TES code:		C3
Estimate Reliability:		Medium
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Division 82 of the Income Tax Assessment Act 1997 Division 82 of the Income Tax (Transitional Provisions) Act 1997

Non-superannuation termination payments are generally paid by employers to terminating employees. Before 1 July 2007 these amounts were taxed in the same way as superannuation lump sums from untaxed funds with the exception of bona fide redundancy payments and approved early retirement scheme payments which were tax free up to certain limits. This tax expenditure excludes the treatment of payments in lieu of leave.

From 1 July 2007, non-superannuation termination payments are taxed differently to lump sums paid from untaxed funds. Pre-June 1983 and invalidity amounts are tax free, and the residual is taxed at 15 per cent for amounts up to $140,000 (indexed) for recipients aged above preservation age and at 30 per cent for those aged under preservation age. Amounts in excess of $140,000 are taxed at the top marginal tax rate. The Medicare levy is payable in addition to these rates. Transitional arrangements also apply for entitlements in place as at 9 May 2006. The tax treatment of genuine redundancy payments and early retirement scheme payments has not changed.

This tax expenditure excludes the treatment of payments in lieu of leave (see the tax expenditures Capped taxation rates for lump sum payments for unused recreation and long service leave (C2) and Taxation of five per cent of unused long service leave accumulated by 15 August 1978 (C16)).

C4 Superannuation - capital gains tax discount for funds

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
1,560	1,020	250	60	70	80		230		460
Tax expenditure type:		Exemption, Reduction in taxable value				2009 TES code:		C4
Estimate Reliability:		Low
Commencement date:		1999				Expiry date:
Legislative reference:		Paragraph 115-10(b) and subparagraph 115-100(b)(i) of the Income Tax Assessment Act 1997

Capit
al gains made by complying superannuation funds are taxed concessionally. Two-thirds of any nominal capital gain made from a capital gains tax event occurring on or after 21 September 1999 is included in the assessable income of a fund, provided the fund has held the asset for at least one year. The effect of this item is in addition to the effect of lower tax rates for superannuation investments reported in the tax expenditure Superannuation - concessional taxation of superannuation entity earnings (C6). The amounts reported reflect the additional tax that would be raised at fund rates on the same investments if total nominal capital gains were taxed instead of discounted gains or gains with frozen indexation.

C5 Superannuation - concessional taxation of employer contributions

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
11,400	13,150	13,300	14,100	14,300	15,800		16,300		17,900
Tax expenditure type:		Exemption, Reduction in taxable value				2009 TES code:		C5
Estimate Reliability:		Medium
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Before 1 July 2007: Part III, Division 3, Subdivision AA of the Income Tax Assessment Act 1936 Part IX of the Income Tax Assessment Act 1936 Superannuation contributions tax acts (surcharge acts) After 1 July 2007: Divisions 290, 292 and 295 of the Income Tax Assessment Act 1997

Currently, employer contributions, after certain costs of the superannuation entity are deducted, are generally taxed as assessable income of a superannuation entity at a concessional rate of 15 per cent. Concessional deductible contributions subject to the 15 per cent tax rate are limited to $25,000 per annum, subject to transitional arrangements for persons aged 50 and over at $50,000 per annum. Contributions above these limits are taxed at the top marginal tax rate and Medicare Levy by applying an additional tax of 31.5 per cent on the excess contribution payable by the individual.

From 1 July 2012, individuals aged 50 and over with total superannuation balances below $500,000 will be able to receive concessional taxation treatment on up to $50,000 of concessional contributions per annum. This doubles the cap of $25,000 which is scheduled to apply from 1 July 2012.

Prior to 1 July 2009, individuals could receive concessional taxation treatment on up to $50,000 ($100,000 for persons over 50) of concessional contributions. Before 1 July 2007, employers were not entitled to a deduction for contributions in excess of an employee's age-based limit.

The superannuation surcharge for higher income earners applied to some of these contributions in 2004-05 and earlier financial years. The maximum surcharge rates were reduced from the original 15 per cent to 14.5 per cent in 2003-04, and to 12.5 per cent in 2004-05. The surcharge was abolished for contributions made on or after 1 July 2005.

In any particular year, the application of the benchmark treatment rather than the concessional tax rates to these contributions would increase tax revenue by the amounts indicated. From 1 July 2012, a superannuation contributions tax rebate of up to $500 annually will be provided for low-income earners. The amount payable will be calculated by applying a 15 per cent rebate of tax to the concessional contributions made by or for individuals on adjusted taxable incomes of up to $37,000 (not indexed), with an annual maximum amount payable of $500 (not indexed).

Concessional superannuation contributions made in the 2012-13 income year and later income years will be eligible, with the first rebate paid in the 2013-14 income year. The new superannuation contributions tax rebate is included in the tax expenditure Superannuation - measures for low-income earners (C9).

C6 Superannuation - concessional taxation of superannuation entity earnings

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
12,900	22,050	16,300	10,900	12,200	13,600		15,200		17,900
Tax expenditure type:		Exemption, Reduction in taxable value				2009 TES code:		C6
Estimate Reliability:		Low
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Before 1 July 2007: Part IX of the Income Tax Assessment Act 1936 After 1 July 2007: Division 295 of the Income Tax Assessment Act 1997

The earnings of complying superannuation entities, after certain costs of the entities are deducted, are taxed at a concessional rate. The tax rate on earnings is 15 per cent (for the accumulation phase) or nil where they are derived from assets which are used to meet current pension liabilities (drawdown phase). Complying superannuation entities are entitled to refunds of excess imputation credits attached to dividends payable to the fund.

For financial year 2007-08 and later years, this item also includes the concessional taxation of fund earnings on funded superannuation income streams (for earlier years all superannuation income stream related items are included in the tax expenditure Superannuation - tax on funded superannuation income streams (C15)).

This tax expenditure reflects the extra tax in a particular year that would be collected if superannuation earnings were taxed at the personal tax rates of members rather than fund rates.

C7 Superannuation - concessional taxation of unfunded superannuation

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
160	380	380	390	390	420		440		460
Tax expenditure type:		Concessional rate				2009 TES code:		C7
Estimate Reliability:		Medium
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Part III, Division 2, Subdivision AA of the Income Tax Assessment Act 1936 Part III, Division 14 of the Income Tax Assessment Act 1936 Part III, Division 17, Subdivision AAA of the Income Tax Assessment Act 1936 Part IX of the Income Tax Assessment Act 1936 Superannuation contributions tax acts (surcharge acts) Part 3-30 of the Income Tax Assessment Act 1997 Subdivision 320-D of the Income Tax Assessment Act 1997 Part 3-30 of the Income Tax (Transitional Provisions) Act 1997

In the case of unfunded superannuation, no employer contribution is made until the actual benefit is provided on the member's retirement. The appropriate benchmark treatment for these amounts is therefore taxation at personal rates on receipt by the member.

Unfunded superannuation lump sums are taxed in the same way as funded superannuation lump sums from untaxed funds (see the tax expenditures Superannuation - tax on funded lump sums relating to post-June 1983 service (C13) and Superannuation - tax on funded lump sums relating to pre-July 1983 service (C14)).

Pension payments from an unfunded source are included in the taxpayer's assessable income and are subject to tax at marginal rates. From 1 July 2007, pension payments from an unfunded source became eligible for a 10 per cent tax offset for persons aged 60 or over.

The taxation of a death benefit paid to a dependant as a reversionary pension depends on the age of the primary and reversionary beneficiary. If either was aged 60 or over at the time of death, then payments to the reversionary beneficiary will taxed at marginal rates with a 10 per cent tax offset. If both were under age 60 at the time of death, the pension will be taxed at the reversionary beneficiary's marginal tax rate (less any tax free component and any relevant offset) unless, or until, the reversionary beneficiary is aged 60 or over, in which case it will become eligible for the 10 per cent tax offset.

Death benefit payments to non-dependants must be made as a lump sum. Lump sum death benefits paid to a non-dependent from an untaxed source are taxed at 30 per cent.

C8 Superannuation - deduction and concessional taxation of certain personal contributions

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
1,050	2,050	1,750	1,600	1,050	1,050		1,250		1,250
Tax expenditure type:		Exemption, Reduction in taxable value				2009 TES code:		C8
Estimate Reliability:		Medium - Low
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Before 1 July 2007: Part III, Division 3, Subdivision AB of the Income Tax Assessment Act 1936 Section 26-80 of the Income Tax Assessment Act 1997 Part IX of the Income Tax Assessment Act 1936 Superannuation contributions tax acts (surcharge acts) After 1 July 2007: Division 290 of the Income Tax Assessment Act 1997 Division 295 of the Income Tax Assessment Act 1997 Division 292 of the Income Tax Assessment Act 1997

Currently, certain persons are entitled to a full deduction for all personal contributions they make to a superannuation fund, provided that the deduction is not greater than the amount that reduces the individual's taxable income to nil. For the purposes of this deduction, the persons entitled are those who have less than 10 per cent of their income earned as an employee. This includes many unincorporated and substantially self-employed persons and persons not in paid employment.

These personal contributions are concessional deductible contributions and subject to the 15 per cent tax rate on the first $25,000 contributed per annum, subject to transitional arrangements for persons aged 50 and over at $50,000 per annum. Contributions above $25,000 ($50,000) are taxed at the top marginal tax rate and Medicare Levy by applying an additional tax of 31.5 per cent on the excess contribution. This tax is payable by the individual.

From 1 July 2012, individuals aged 50 and over with total superannuation balances below $500,000 will be able to receive concessional taxation treatment on up to $50,000 in concessional contributions per annum. This doubles the cap of $25,000 which is scheduled to apply from 1 July 2012.

Prior to 1 July 2009, individuals could make up to $50,000 ($100,000 for persons over 50) of concessional deductible contributions subject to the 15 per cent tax rate. The 2009 changes to the levels subject to 15 per cent tax are reflected in the tax expenditure estimates with a one year delay.

Prior to 1 July 2007, eligible self-employed persons received a full tax deduction for the first $5,000 of contributions plus 75 per cent of any remaining contributions up to a maximum deduction equal to their age-based limit.

Under the benchmark, contributions by these persons would not be deductible, on the basis that they are not outgoings. If the level of contributions was maintained, but the contributions were not deductible, revenue would be higher by the amounts indicated.

The superannuation surcharge for higher income earners applied to some of these contributions in 2004-05 and earlier financial years. The surcharge was abolished for contributions made on or after 1 July 2005.

From 1 July 2012, a superannuation contributions tax rebate of up to $500 annually will be provided for low-income earners. The amount payable will be calculated by applying a 15 per cent rebate of tax to the concessional deductible contributions made by or for individuals on adjusted taxable incomes of up to $37,000 (not indexed), with an annual maximum amount payable of $500 (not indexed).

Concessional superannuation contributions made in the 2012-13 income year and later income years will be eligible, with the first rebate paid in the 2013-14 income year. The new superannuation contributions tax rebate is included in the tax expenditure Superannuation - measures for low-income earners (C9).

C9 Superannuation - measures for low-income earners

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
260	500	280	230	290	170		160		280
Tax expenditure type:		Exemption, Reduction in taxable value				2009 TES code:		C9
Estimate Reliability:		Medium - Low
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Before 1 July 2003: Part III, Division 17, Subdivision AAC of the Income Tax Assessment Act 1936 After 30 June 2003: Superannuation (Government Co-Contribution for Low Income Earners) Act 2003

The existing superannuation co-contribution, applying to eligible non concessional superannuation contributions, and the proposed superannuation low-income earner contribution, to apply to eligible concessional superannuation contributions, are expense measures. As such, these payments are not included in the TES. The amounts indicated represent the impact of these payments not being taxed.

C10 Superannuation - spouse contribution offset

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
15	10	8	6	4	3		3		3
Tax expenditure type:		Exemption, Reduction in taxable value				2009 TES code:		C10
Estimate Reliability:		Medium
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Before 1 July 2007: Part III, Division 17, Subdivision AACA of the Income Tax Assessment Act 1936 After 30 June 2007: Subdivision 290-D of the Income Tax Assessment Act 1997

An 18 per cent offset is available for post-tax contributions to the superannuation account of a spouse (where the total of assessable income and reportable fringe benefits for the spouse is less than $13,800). A maximum offset of $540 applies for a contribution of $3,000 where the spouse's income is less than $10,800. The offset is phased out and is no longer payable where the spouse's income exceeds $13,800.

C11 Superannuation - tax on excess concessional contributions

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
-	-	-	-7	*	*		*		*
Tax expenditure type:		Increased rate				2009 TES code:		C11
Estimate Reliability:		Medium - High				* Category		2-
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Before 1 July 2007: Part III, Division 3, Subdivision AA of the Income Tax Assessment Act 1936 Part IX of the Income Tax Assessment Act 1936 Superannuation contributions tax acts (surcharge acts) After 1 July 2007: Divisions 290, 292 and 295 of the Income Tax Assessment Act 1997

Currently, employer contributions, after certain costs of the superannuation entity are deducted, are generally taxed in the assessable income of a superannuation entity at a concessional rate of 15 per cent; the tax expenditure from this is shown at C5.

Caps apply to the amount of concessional contributions which receive this concessional taxation treatment. Concessional deductible contributions subject to the 15 per cent tax rate are limited to $25,000 per annum, subject to transitional arrangements for persons aged 50 and over at $50,000 per annum. Contributions above these limits are taxed at the top marginal tax rate and Medicare Levy by applying an additional tax of 31.5 per cent on the excess contribution payable by the individual. A negative tax expenditure occurs where a person contributes to superannuation above the relevant cap and their marginal rate is below the top marginal rate.

C12 Superannuation - tax on excess non-concessional contributions

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
-	-	-3	-22	*	*		*		*
Tax expenditure type:		Exemption, Reduction in taxable value				2009 TES code:		C12
Estimate Reliability:		Not Applicable				* Category		3-
Commencement date:		10 May 2006				Expiry date:
Legislative reference:		Division 292 of the Income Tax (Transitional Provisions) Act 1997 Division 292 of the Income Tax Assessment Act 1997

Non-concessional contributions include those made from an individual's after tax income (generally undeducted contributions) and excess concessional contributions (that is, employer and personal deducted contributions which have exceeded the annual concessional contribution thresholds). The benchmark treatment of these contributions is that they are taxed like any other income in the hands of the individual (that is, the contributions are taxed at the individual's marginal tax rate).

Prior to 9 May 2006, the tax treatment of non-concessional (then referred to as undeducted) contributions was consistent with the benchmark. Since 10 May 2006, non-concessional contributions have been subject to a cap, with contributions in excess of the cap taxed at the top marginal tax rate, payable by the individual. The taxation of these excess contributions represents a deviation from the benchmark.

A cap of $1 million applies to non-concessional contributi
ons made between 10 May 2006 and 30 June 2007. From 1 July 2007, an annual cap of $150,000 applies to non-concessional contributions, although people under age 65 will be able to bring forward up to two years worth of non-concessional contributions. Exemptions to the cap include proceeds from the disposal of assets that qualify for some small business CGT concessions, up to a lifetime limit of $1.045 million, and proceeds arising from structured settlements or orders for personal injuries.

C13 Superannuation - tax on funded lump sums relating to post-June 1983 service

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
-170	-195	-150	-150	-150	-150		-150		-150
Tax expenditure type:		Exemption, Reduction in taxable value				2009 TES code:		C13
Estimate Reliability:		Medium
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Before 1 July 2007: Part III, Division 2 of the Income Tax Assessment Act 1936 Part III, Division 14 of the Income Tax Assessment Act 1936 Part III, Division 17 of the Income Tax Assessment Act 1936 After 1 July 2007: Division 301 of the Income Tax Assessment Act 1997 Division 302 of the Income Tax Assessment Act 1997 Division 307 of the Income Tax Assessment Act 1997 Part 3-30 of the Income Tax Assessment Act 1997 Part 3-30 of the Income Tax (Transitional Provisions) Act 1997

For taxed funds, the taxable component of lump sums is generally taxed at 20 per cent where the taxpayer is aged under 55 years.

For lump sums paid before 1 July 2007 to taxpayers aged 55 or over, or paid after 30 June 2007 to taxpayers aged 55 to 59, the element of any lump sum benefit taxed during the accumulation stage is typically taxed at zero per cent up to the low rate threshold and 15 per cent thereafter.

Untaxed funds are those where superannuation benefits are not taxed during the accumulation phase. For taxpayers under age 55 both before and from 1 July 2007, the taxation rate on these elements is typically 30 per cent. For taxpayers aged 55 or over before 1 July 2007, the element of a lump sum untaxed during the accumulation stage was typically taxed at 15 per cent up to the low rate threshold and 30 per cent thereafter. From 1 July 2007, lump sums received by taxpayers aged 55 to 59 are subject to tax rates ranging from 15 per cent to the top rate.

From 1 July 2007, the element of a lump sum from a taxed source relating to post-June 1983 service is tax free for persons aged 60 or over. The post-June 1983 element untaxed in a fund is typically taxed at 15 per cent up to an amount of $1 million for persons aged 60 or over.

Special arrangements apply to lump sums paid to certain temporary residents who have departed Australia. The taxed element of these lump sum payments is taxed at 35 per cent and the untaxed element at 45 per cent (from 1 July 2002 to 1 April 2009 the tax rates were 30 per cent and 40 per cent respectively).

Lump sum payments to death benefit dependents (and non-dependents of service and police personnel killed in the line of duty) and to persons suffering from a terminal medical condition are tax free.

Death benefit payments to non-dependants must be made as a lump sum. Lump sum death benefits paid to a non-dependent from a taxed source are taxed at 15 per cent.

The amounts reported are the tax raised on these lump sums.

C14 Superannuation - tax on funded lump sums relating to pre-July 1983 service

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
-17	-	-	-	-	-		-		-
Tax expenditure type:		Exemption, Reduction in taxable value				2009 TES code:		C14
Estimate Reliability:		High
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Before 1 July 2007: Section 27C of the Income Tax Assessment Act 1936 After 1 July 2007: Sections 307-210 and 307-225 of the Income Tax Assessment Act 1997

Before 1 July 2007, the part of a lump sum benefit relating to service before July 1983 was taxed at a lower rate. Only 5 per cent of the pre-July 1983 amount was included in a taxpayer's assessable income and subject to tax at marginal rates. This concessional treatment reflected the regime for taxing eligible termination payments that existed before July 1983. Applying the post-June 1983 tax rates to these funded benefits would have imposed a tax retrospectively. The amounts reported are the tax raised on these lump sums.

From 1 July 2007, the component of a lump sum benefit relating to pre-July 1983 service is tax free.

C15 Superannuation - tax on funded superannuation income streams

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
*	*	*	*	*	*		*		*
Tax expenditure type:		Exemption, Reduction in taxable value				2009 TES code:		C15
Estimate Reliability:		Not Applicable				* Category		1-
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Before 1 July 2007: Part III, Divisions 2, 14 and 17 of the Income Tax Assessment Act 1936 After 1 July 2007: Divisions 301 and 302 and Par t 3-30 of the Income Tax Assessment Act 1997 Part 3-30 of the Income Tax (Transitional Provisions) Act 1997

The taxable component of superannuation income stream payments received by a taxpayer before 1 July 2007 was included in assessable income and subject to tax at marginal rates. The taxable component of superannuation income stream payments from a taxed source to a taxpayer aged 55 or over generally attracted a tax offset of 15 per cent. The tax raised reduces the total superannuation tax expenditure, as under the benchmark withdrawals from superannuation are tax free.

From 1 July 2007, superannuation income stream payments from a taxed source are tax free for persons aged 60 or over. The taxable component of superannuation income stream payments received by a taxpayer below age 60 are included in assessable income. A tax offset of 15 per cent applies to the taxable component of superannuation income stream payments paid to taxpayers aged 55 to 59, and to disability benefits paid to taxpayers of any age.

The taxable component of pension payments from an untaxed source are eligible for a 10 per cent tax offset for persons aged 60 or over.

From 1 July 2007, this item relates to the tax on funded pensions for persons under the age of 60.

The taxation of a death benefit paid from a taxed source as a reversionary pension depends on the age of the primary and reversionary beneficiary. If either the primary or reversionary beneficiary was aged 60 or over at the time of death, then income stream payments to the reversionary beneficiary will be tax free. If both were under age 60 at the time of death, the taxable component will be taxed at the reversionary beneficiary's marginal tax rate (less a 15 per cent tax offset) unless, or until, the reversionary beneficiary is aged 60 or over, in which case it will be tax free.

C16 Taxation of five per cent of unused long service leave accumulated by 15 August 1978

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
75	75	65	70	65	65		65		60
Tax expenditure type:		Concessional rate				2009 TES code:		C16
Estimate Reliability:		Medium - High
Commencement date:		Introduced before 1985				Expiry date:
Legislative reference:		Subsection 26AD(5) of the Income Tax Assessment Act 1936 Subsection 83-80(1) of the Income Tax Assessment Act 1997

A reduced tax rate applies to lump sum payments for unused long service leave which accrued prior to 15 August 1978. Five per cent of such payments is included in the taxpayer's assessable income and is subject to tax at marginal rates.

C17 Trans-Tasman retirement savings portability scheme

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
-	-	-	*	*	*		*		*
Tax expenditure type:		Exemption				2009 TES code:		C17
Estimate Reliability:		Low				* Category		1+
Commencement date:		1 June 2010				Expiry date:
Legislative reference:		Not yet legislated

Transfers of retirement savings from overseas countries into the Australian superannuation system are generally treated as non-concessional contributions.

Under this measure amounts transferred from a New Zealand Kiwi Saver account to an Australian APRA regulated complying superannuation fund will also be generally treated as non-concessional contributions.

As such New Zealand sourced retirement savings transferred under the scheme will be subject to the non-concessional contributions cap on initial entry into the Australian superannuation system.

Tax concessions for certain taxpayers

C18 Exemption of foreign termination payments

Other economic affairs - Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
-	*	*	*	*	*		*		*
Tax expenditure type:		Exemption				2009 TES code:		New
Estimate Reliability:		Low				* Category		1+
Commencement date:		1 July 2007				Expiry date:
Legislative reference:		Subdivision 83-D of the Income Tax Assessment Act 1997

Certain termination payments paid as a result of the termination of foreign employment are non-assessable and non-exempt income for tax purposes. To be non-assessable and non-exempt, the payment must have been paid to a taxpayer who was a foreign resident during the period to which the payment relates and must not be a superannuation benefit or a pension or annuity. Where the taxpayer was an Australian resident for some of the period to which the termination payment relates, the payment will be non-assessable and non-exempt if it was received in consequence of the termination of a period of employment or engagement for the purposes of section 23AF or section 23AG and the payment relates only to that period of employment or engagement and is not a superannuation benefit or a pension or annuity.

Tax expenditures for other economic affairs

C19 Small business capital gains tax exemption for assets held more than 15 years

Other economic affairs - Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
55	100	125	85	95	105		105		115
Tax expenditure type:		Exemption				2009 TES code:		C20
Estimate Reliability:		Medium - Low
Commencement date:		1999				Expiry date:
Legislative reference:		Subdivision 152-B of the Income Tax Assessment Act 1997

Capital gains arising from the disposal of active small business assets that have been held continuously for 15 years are exempt from capital gains tax. This exemption is available only if the taxpayer is permanently incapacitated or reaches the age of 55 and retires. An eligible small business is one where the net value of assets that the taxpayer and connected entities own is no more than $6 million, or where the aggregated annual turnover is less than $2 million.

C20 Superannuation - payment of temporary residents' superannuation to the Australian Government

Other economic affairs - Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
-	-	-170	-135	-115	-110		-130		-120
Tax expenditure type:		Increased rate				2009 TES code:		C21
Estimate Reliability:		Medium - Low
Commencement date:		18 December 2008				Expiry date:
Legislative reference:		Superannuation (Unclaimed Money and Lost Members) Act 1999

The superannuation of a temporary resident (who is not a New Zealand citizen, retirement visa holder or applying for permanent residency) will be deemed to be 'unclaimed' after they have left Australia, ceased to hold a temporary visa, and at least six months has passed and they have not taken their superannuation. The amounts will be paid to the Australian Government commencing in the 2008-09 year.