After so many changes to superannuation over the last decade it was a relief to see the Government maintaining stability within the sector. There has been some minor tinkering to SMSFs, fee caps introduced and changes to how life insurance is being offered. See below for an outline of the superannuation measures introduced from the recent Federal Budget:
Changes from 1 July 2019
- If you are a recent retiree with less than $300,000 in total super, a one-year exemption from the ‘work test’ will apply. This will allow an additional year to make contributions before you’ll need to satisfy the work test.
- Life insurance in superannuation changes will mean that insurance can only be offered an ‘opt-in basis’ if you are a new member under 25, you have an inactive account, or an account balance under $6,000. This measure has been put in place to help prevent insurance from eroding small super balances.
- Exit fees are being abolished, and administration administration/investment fees will be capped at 3% pa on accounts with balances of less than $6,000.
- The ATO will work to proactively reunite Australians’ dormant superannuation funds with their active account, with inactive balances less than $6,000 to be transferred to the ATO.
- The number of members in Self Managed Super Funds will increase from four to six. The idea behind this change is to “ensure SMSFs remain a compelling retirement savings vehicle” according to Financial Services Minister Kelly O’Dwyer. This change is due to take effect from 1 July 2019.
- The other notable change for SMSFs is that from 1 July 2019 the certain SMSFs can move to a three yearly audit cycle. This measure is aimed at reducing the compliance burden of SMSFs but it is only available to SMSFs with good compliance history. If the fund’s tax returns are lodged on time and the audit reports are clear then this measure may apply to your fund.
Previous budget measures coming into effect from 1 July 2018
There are some key opportunities announced in previous Federal Budgets that are already legislated to take effect on 1 July 2018. These include:
- If you’re aged 65 or over you may be able to make ‘downsizer’ super contributions of up to $300,000 from the proceeds of selling your home.
- First home buyers who have made super contributions under the First Home Super Saver Scheme can access their money for eligible property purchases. There are quite a few rules involved in this measure – stay tuned for future blog posts on the First Home Super Saver Scheme.
- If the annual concessional contribution cap has not been fully utilised, it may be possible to accrue unused amounts for use in future financial years.
- Individuals can now claim tax deductions for personal superannuation contributions – being mindful that the $25,000 cap is not exceeded as this cap includes your employer contributions too.
Author: Simone Hill