While there may be a new look leadership this year, the 2019/20 Federal Budget handed down by Treasurer Mr Josh Frydenberg, continued the theme from last year of leaving superannuation largely untouched. The three key announcements concerning superannuation are all focused on flexibility and efficiency and can only be seen as positive for all superannuation members.
The key changes proposed for superannuation and Self Managed Superannuation Funds (SMSFs) are:
Greater flexibility for retirement contributions
From 1 July 2020, Australians aged 65 and 66 will now be able to make voluntary superannuation contributions, both concessional and non-concessional, without meeting the Work Test. Previously, this was only available to individuals below 65. The Work Test requires individuals to have been gainfully employed for a minimum of 40 hours in a 30 day period prior to making a contribution in the relevant financial year.
This will align the Work Test with the eligibility age for the Age Pension, which is scheduled to reach 67 from 1 July 2023. There are around 55,000 Australians aged 65 and 66 who will benefit from this reform in 2020/21.
This measure includes extending access to the bring-forward arrangements to individuals aged 65 and 66 which allows individuals to make three years’ worth of non-concessional contributions to their super in a single year.
The Government has also increased the age limit for spouse contributions from 69 to 74. Currently, those aged 70 years and over cannot receive contributions made by another person on their behalf.
The Work Test Exemption which allows individuals a further year to voluntarily contribute to superannuation after they have finished working will still apply to individuals from 67 to 74.
Simplification of exempt current pension income
The Government will streamline administrative requirements for the calculation of exempt current pension income (ECPI).
The Government will allow superannuation fund trustees with interests in both the accumulation and retirement phases during an income year to choose their preferred method of calculating ECPI.
Where all members of a fund are fully in retirement phase for the income year, the redundant requirement for them to obtain an actuarial certificate when calculating ECPI will also be removed.
This change will reduce unnecessary red-tape and cost for SMSFs in pension phase.
Reducing costs for super industry by including superannuation release authorities in electronic SuperStream Rollovers
The Government will provide $19.3 million over three years from 2020/21 to the Australian Taxation Office (ATO) to send electronic requests to superannuation funds for the release of money required under a number of superannuation arrangements. This is an improvement on the current process which includes physical documentation.
The start date of SMSF rollovers in SuperStream will be delayed until 31 March 2021 to coincide with the expansion of the SuperStream.
Despite being a long-term savings system for Australians in retirement, in recent years we have almost seen superannuation become a balancing tool for Federal Budgets. This has come at not only a physical cost to members to implement extensive changes, but seen confidence in the system eroded.
Therefore it is good to see the Government maintaining its promise to not adversely or extensively change superannuation for consecutive years. However, with a looming Federal election it is likely that we will see superannuation again take centre stage. These proposed changes may never actually see the light of day and instead we may find ourselves with an entirely different situation.
In the lead up to the election and prior to the end of the financial year, further changes will likely be put forward which will provide opportunities for strategy and planning. If you have any questions please speak to your usual Allan Hall advisor or contact us using the button below and we can organise one of our superannuation specialists to contact you.