Macquarie welcomes ATO “transition to retirement” statement

10 November 2005

Macquarie Adviser Services' Head of Technical Services David Shirlow today welcomed a statement made by Australian Commissioner for Taxation, Michael Carmody, in an Estimates Hearing recently, announcing that clarifications on "transition to retirement" pensions were imminent.

Mr Shirlow said Mr Carmody's indication that clarification was pending was welcome because in the vast majority of cases it will provide financial planners and their clients with sufficient certainty to proceed with plans involving "transition to retirement" pensions and further superannuation contributions.

The "transition to retirement" pensions which were introduced by the Federal Government in July this year means that people who are aged 55 to 64 inclusive, who are still in the workforce, can opt to supplement their work income.

"Many of these people will still want to arrange further contributions to superannuation to build up the benefit which will be available to them when they ultimately retire or turn 65," Mr Shirlow said.

"However, there has been some uncertainty around whether the Australian Tax Office (ATO) would regard as tax avoidance some situations where a person is arranging additional super savings at the same time as drawing on a super pension."

In the Estimates Hearing Mr Carmody said that: "the ATO's position, subject to finalisation, is on the face of it, a straightforward application of the law and we would not see grounds for the anti-avoidance rules applying in those circumstances".

Mr Shirlow said the Government's initiative in introducing the "transition to retirement pensions" is a valuable one for people in the 55 to 64 age bracket who may be looking for a more flexible approach to work arrangements prior to full retirement.

"Until now there has been some prudent caution among advisers about recommending strategies without a clear statement of the ATO's position, because of a perceived breach of tax avoidance rules," Mr Shirlow said.

"The Commissioner has indicated that he will respond promptly to remove this uncertainty."

Mr Shirlow said Mr Carmody's had signaled a likely green light will be provided to advisers to provide what will be a fairly typical retirement savings strategy for people in this age bracket.

"The estimates' statement caps off a number of positive measures which will make higher levels of superannuation saving markedly more attractive for many households," Mr Shirlow said.

"It comes on the back of the removal of contributions surcharge on deductible superannuation contributions, the introduction of legislation to enable married couples to transfer super contributions made for one spouse into the super account of the other and proposals to improve the features of both allocated pensions and term allocated pensions.

"Once legislated, improvements to new allocated pensions and term allocated pensions are expected to apply to new pensions started from 1 January 2006, and the 'spouse super splitting' initiative is also expected to apply to contributions made from that date."

Mr Shirlow said that large superannuation providers, like Macquarie, are expecting strong interest from the many people who stand to significantly benefit from these new initiatives.

For further information, please telephone:

Irene O'Brien
Head of PR & Communication
Macquarie Financial Services Group
Macquarie Funds Management Group
Tel: (612) 8232 3241
Mobile: (61) 417 260 309

Contact us

Please email us for all media enquiries