The Government will modify the tax treatment of Eligible Termination Payments (ETPs) from superannuation funds to limit the effective overall rate of taxation that applies to the excessive component, from 1 July 2002.
The excessive component of an ETP is the portion of the payment that exceeds the taxpayer's Reasonable Benefit Limit (RBL). For the 2001-02 income year the lump sum RBL is $529,373.
This measure was first announced on 5 November 2001 in the policy document A Better Superannuation System.
This measure, combined with the Government's other initiatives will encourage increased savings and self-reliance in retirement. In particular, the new tax treatment will recognise that the effective tax rate on excessive superannuation ETPs can be unduly high.
The Government will consult with the superannuation industry before finalising the detail of the changes required to implement this commitment.