In a welcome respite from years of major changes, there wasn’t much in last night’s Federal Budget about superannuation. The few changes were relatively minor and non-controversial, including:
- Permanent Capital Gains Tax relief for merging super funds
- Relaxed contribution rules for older Australians
- Increased funding for regulators
- Adjustments to reflect the final Protecting Your Super Act
- Establishment of a Superannuation Consumer Advocate
The changes announced in the Budget require legislation. Parliament will sit for the next few days, but an election on 11 May is likely to be called on this coming Sunday or Monday.
We have detailed the superannuation changes in the Budget below:
The Government has announced permanent Capital Gains Tax relief for merging funds. Previously, this relief has been granted on a temporary basis. There are likely to be significant fund mergers in the near future and this will ensure some members receive an increased benefit.
From 1 July 2020, 65 and 66 year-olds will be able to make voluntary contributions (both concessional and non-concessional) to their superannuation without having to meet a work test. Currently, people aged 65 and over have to work for a minimum 40 hours over a 30 day period in the relevant financial year.
People aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring-forward rule. People up to and including age 74 will be able to receive spouse contributions, with those 65 and 66 no longer needing to meet a work test. Currently, people aged 65 to 74 can only make voluntary contributions if they work a minimum of 40 hours over a 30 day period in a financial year. People aged 65 and over cannot access bring-forward arrangements and those aged 70 and over cannot receive spouse contributions.
The Government says that aligning the work test with the eligibility age for the Age Pension (scheduled to reach 67 from 1 July 2023) and increasing the age limit for spouse contributions to 74 will give older Australians greater flexibility to save for retirement.
The Government will provide $42 million over the next few years for the ATO to recover unpaid tax and superannuation liabilities including from large corporate entities and high wealth individuals.
They will ramp up regulator spending by more than $640 million, including:
- over $400 million to ASIC to support its new enforcement and supervisory strategies
- over $150 million to APRA to strengthen supervision and enforcement
- over $35 million for a new criminal jurisdiction of the Federal Court.
As a result of the Government agreeing to amendments to the Protecting Your Super Package the Budget was amended to take account of:
- extending to 16 months the period after which an account that has not received any contribution is considered inactive;
- expanding the definition of when an account is considered active for the ATO-led consolidation regime; and
- requiring the ATO to consolidate to an active account, where possible, within 28 days of receipt.
The Government has also announced its intention to establish a Superannuation Consumer Advocate and called for expressions of interest.
We would love to hear what you think of the changes announced in the Federal Budget. Leave us your thoughts and comments below. If you would like to find out more about how these changes will impact you, you can contact us at firstname.lastname@example.org.
Written by David Haynes