Each May, the Federal Government delivers the Federal Budget budget which sets out how it hopes to raise and spend money over the following 12 months. The Budget is also used to make significant policy announcements.
The 2018/19 Federal Budget was delivered by Treasurer Scott Morrison on Tuesday 8 May 2018. The proposed changes affecting superannuation and retirement include:
- A cap on admin and investment fees on low balance super accounts (with less than $6,000) at 3 per cent to prevent low super balances being eroded by fees. This may see fees reduce for some fund members.
- A ban on all super fund exit fees. According to APRA, super members lost approximately $52 million in exit fees in 2016/17.
Insurance within super to be opt-in rather than default for: members under 25; members with balances of less than $6,000; and members whose accounts have not received a contribution in 13 months and are inactive. A number of Industry SuperFunds have already taken steps to change insurance coverage for younger members. It will be important to ensure no workers are left without insurance, such as new entrants to the workforce, women on extended maternity leave or low balance workers in high-risk jobs. This change is likely to impact the insurance arrangements within super and is proposed to take effect from 1 July 2019.
This proposal is for all super accounts that have not received a contribution for 13 months, with balances below $6,000, to be classified as inactive and transferred to the ATO and for the ATO to attempt to proactively reunite those accounts with a member’s active account. Accounts not auto-consolidated will go to consolidated revenue until validly claimed. These changes may have implications for seasonal and other irregular workers. You will be able to inform your fund that whilst you are not making contributions you wish your monies to remain in your fund. You can currently seek to consolidate your super, for more information click here. The measure starts 1 July 2019.
ATO to monitor ‘Notice of Intent’ requirements
Tightening rules for tax deductions on personal contributions to ensure super fund members who receive a tax deduction on personal super contributions are completing ‘Notice of Intent’ forms. The measure commences on 1 July 2018.
Allowing retirees to work more
The Pension Work Bonus to increase to $300 per fortnight (an additional $50). This allows pensioners to earn up to $300 each fortnight without reducing their Age Pension payments. The measure also extends coverage to self-employed members. This measure commences 1 July 2019.
Allowing retirees to make voluntary contributions in the first year of retirement
Retirees aged between 65 and 74 with a superannuation balance below $300,000 will be allowed to make voluntary super contributions for the first year that they no longer meet the work test requirements.
Retirement income products
A new retirement income framework, requiring super funds to offer whole of life products and to provide standardised information. The age pension means test rules will also be changed.
Pension Loan Scheme
Expansion of the Pension Loan Scheme to allow Aged Pensioners to boost their income with a loan from the government against the equity in your home. $11,799 for singles or $17,787 for couples per year can be paid in fortnightly payments to supplement existing income. These payments are a loan with the government, attract interest and need to be repaid from sale proceeds of your house or can be repaid at any time.
High income earners
High income earners (individuals who earn more than $263,157 a year) with multiple employers will be able to make wages from certain companies exempt from the Superannuation Guarantee (SG) to avoid breaching the Concessional Contributions Cap.
Self-managed super funds
The maximum number of trustees allowed in a self-managed super fund will be raised from four to six, and from July next year the government will allow funds with "a history of good record-keeping and compliance" to obtain an audit once every three years instead of annually.
No change to legislated SG Increase
The Budget did not make any changes to the legislated increase in the SG beginning with an increase from 9.5 per cent to 10 per cent on 1 July 2021.
The changes to super in this budget have sound justification, however an opportunity was missed to address equally if not more urgent issues. It is disappointing the large budget savings from some of these measures are not being used to fix unpaid superannuation or close the gender super gap.
Instead of pocketing the savings, there are three simple policy steps that would ensure millions of Australians, particularly women, who are missing out on super actually do receive it. These are:
- abolishing the $450 super threshold
- paying super on parental leave
- aligning the payment of super and wages.
For more information on the changes see our proposed changes page.
This article was published in May 2018.