According to Costello, the Tax Laws Amendment (Simplified Superannuation) Bill 2006 will sweep away the current raft of complex tax arrangements that apply to superannuation, and cut the number of pages of superannuation law in the income tax assessment Acts by over a third.

The centrepiece of the Bill is that Australians aged 60 or over will be able to access their superannuation benefits tax free from 1 July 2007, if they are paid from a taxed superannuation fund. Costello says that cutting taxes will increase retirement incomes, improve incentives to save, and strengthen incentives for older Australians to remain in the workforce.

As a result of these reforms, in the vast majority of cases, the 90% of Australians in taxed schemes will have the tax treatment of their superannuation benefit covered in one paragraph of law if they access their superannuation after age 60.

Costello claimed that the reforms deliver on the Government’s commitment to simplify and streamline superannuation.

Regulations supporting the Bill will be made after it receives Royal Assent, said Assistant Treasurer Peter Dutton. Key draft regulations, such as the new pension rules, will be exposed earlier for public comment.

Consequent amendments, including the formal repeal of the old law, will be included in another bill to be introduced to Parliament in early 2007, allowing the Bills to be debated concurrently in the Autumn sittings of Parliament.

The total cost of the reforms is A$7.2 billion (US$5.7 billion).

The Treasurer also announced an additional measure to improve the arrangements in respect to lost and unclaimed superannuation.

Currently, superannuation funds have processes in place to notify the Australian Taxation Office (ATO) of superannuation accounts which are inactive, or where the member is uncontactable. Upon notification, the ATO adds this information to the Lost Members Register, which can be used by individuals to search for their lost superannuation accounts.

When an individual reaches age 65 and cannot be contacted by their fund, their superannuation benefits become unclaimed money, and are paid to the government of the state or territory in which the superannuation fund is based. These monies are held in trust by the relevant government until claimed by the rightful owner or their estate.

Under new changes, the Australian Government will take full responsibility for the management of unclaimed superannuation, which means that in future, unclaimed superannuation money will not be paid to the states or territories.

This aims to consolidate the currently fragmented system for tracing superannuation payments by giving individuals a single access point of access. As a result, individuals will be able to seek advice directly from the ATO on any superannuation-related issue, without having to contact numerous government agencies.

The Treasurer said that these changes will not affect state and territory government superannuation schemes.