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Changes impacting super in the 2018-19 Budget

In the Federal Budget on 8 May 2018 a number of proposed measures relevant to superannuation were announced.

There were no major reforms to the tax rules for superannuation and no changes to the legislated schedule for increasing the superannuation guarantee contribution rate to 12 per cent by 2025.

The major measures in the Federal Budget released on 8 May 2018 affecting superannuation include:

  • Making insurance opt-in for members who have balances of less than $6,000, are under the age of 25 years, or whose accounts have not received a contribution in 13 months and are inactive
  • Capping passive fees for accounts with less than $6,000 and banning exit fees for all super accounts
  • Requiring the transfer of all inactive superannuation accounts under $6,000 to the ATO
  • A new retirement income framework, with a retirement covenant requiring trustees to offer comprehensive income products for retirement (CIPRs) and to provide simplified, standardised information on retirement income products, and new means test rules for pooled lifetime income streams
  • A limited, one-year exemption from the work test for voluntary super contributions for people aged 65-74 with superannuation balances below $300,000
  • Allowing high income earners with multiple employers to nominate that wages from certain employers are not subject to the superannuation guarantee, to avoid breaching the concessional contributions cap.

Budget announcements are yet to be legislated and details could change as Bills are debated in the Parliament. For more details on the Budget, click here.

Changes impacting super from the 2017-18 Budget

First Home Super Saver Scheme

The government is allowing first home buyers to withdraw voluntary contributions to superannuation made from 1 July 2017 to fund a first home deposit, with withdrawals allowed from 1 July 2018 onwards. The amounts will be over and above any compulsory contributions, together with associated deemed investment earnings.

The measure applies to voluntary contributions including:

  • salary sacrificed contributions
  • personal contributions from after-tax monies for which the individual claims a tax deduction, including under rules introduced in the 2016-17 Budget and applying from 1 July 2017 (these are treated as concessional contributions)
  • personal contributions from after-tax monies for which no deduction is claimed (these are treated as non-concessional contributions).

Other key aspects of the measure include:

  • first home buyers could contribute up to $15,000 per year from 1 July 2017 and are limited to $30,000 per person in total under the scheme
  • concessional contributions and investment earnings will, while in the fund, continue to be taxed at 15 per cent
  • withdrawals of concessional contributions and associated earnings will be taxed at the individual’s marginal rate, less a 30 per cent offset
  • existing contribution caps continue to apply
  • both members of a couple can take advantage of this measure to buy their first home together.

The Australian Taxation Office (ATO) administers the scheme and determines eligibility. The ATO will calculate release amounts based on information from funds and applicants and will instruct super funds to make payments. The ATO will also be responsible for compliance by applicants. More information is here.

Downsizing the family home – contributing proceeds into superannuation

The government will allow individuals aged 65 years and over to make a non-concessional contribution of up to $300,000 ($600,000 for a couple) from the proceeds of selling their home, from 1 July 2018.

These contributions will be in addition to those currently permitted under existing rules and caps and they will be exempt from the existing age test, work test and the $1.6 million balance test for making non-concessional contributions.

Sale proceeds contributed to superannuation under this measure will remain subject to the Age Pension assets test.

This measure applies to sales of a principal residence owned for the past 10 or more years and both members of a couple will be able to take advantage of this measure for the same home.

For more information, click here.

New complaints handling body for superannuation and financial services

The Superannuation Complaints Tribunal (SCT), Financial Ombudsman Service (FOS) and Credit and Investments Ombudsman (CIO) are being replaced with the new Australian Financial Complaints Authority (AFCA).

The AFCA will be an industry funded complaints resolution body for all financial and superannuation disputes. Australian Financial Services licensees will be required to be members of AFCA and its decisions will be binding on all firms.

The SCT, FOS and CIO will continue to operate until they are wound down by 1 July 2020, to allow them to clear their existing caseloads.

AFCA will start accepting new disputes from 1 November 2018.

For more information, click here.

Changes impacting super from the 2016-17 budget

Catch-up contributions

People can make catch-up contributions from 1 July 2018 using previously unused cap amounts, commencing from 2018-19, on a rolling, five-year basis, as long as they have less than $500,000 in super. This means people can carry forward concessional super contributions if their contributions in any given year fall under the $25,000 concessional contributions cap. This will assist people with interrupted work patterns or those who work part-time, to boost their super. People aged 65 to 74 who meet the work test will be able to use the scheme. For more information, click here.

For more details on other prior budget changes affecting super, click here.