Superannuation was a major focus in the latest Federal Budget, with a range of measures implemented to encourage Australians to save through their super.
Treasurer, Scott Morrison, delivered a budget that is positive to the superannuation sector, a welcome move considering the substantial overhaul which came into effect from 1 July 2017. No doubt caution was also exercised with this budget in view of the outrage received as a result of Bill Shorten’s proposal to scrap dividend franking refunds for retirees.
Key take outs from the 2018 Federal Budget with regards to the superannuation sector are as follows:
SMSF membership increase
The Government confirmed its decision to allow the number of self managed superannuation fund (SMSF) members to increase from four to a maximum of six. The increase in number of fund members will allow for larger families as well as potential flexibility with how SMSFs can be structured moving forward.
SMSF audit requirements
One of the surprises to come out of the budget is the proposed removal of the annual audit requirement to a three year cycle. This will only apply to funds that have a good record keeping and clean compliance history. This is a good result for those SMSF trustees who are doing the right thing year in, year out, and may assist in the reduction of annual compliance costs of running a SMSF.
Work test exemption
Another favourable outcome from the Budget was the proposed work test exemption for those retirees between the ages of 65-74 whom have less than $300,000 in superannuation. The proposal will allow these retirees with balances under $300,000 to utilise the concessional ($25,000) and non-concessional ($100,000) contributions for one year only.
This measure, as well as the ‘downsizer contribution’ – that has been legislated to come into effect from 1 July 2018 (see separate story on page 12) – which allows those who sell their main residence to contribute up to $300,000 into super regardless of the work test, is a good result for retirees with limited superannuation balances.
Superannuation trustees required to develop strategies for members
Another positive outcome for retirees is the proposal to introduce a retirement income strategy. This will require trustees of superannuation funds to develop a strategy that will assist members achieve the most favourable retirement income objectives for their particular circumstances. Trustees of superannuation funds will now be required to offer varying types of pension/income stream products to their members.
SGC opt out for high income earners
A positive outcome for those high earning individuals with multiple employers is that they will now be able to nominate their wage from certain employers to not be subject to the Superannuation Guarantee (SG) from 1 July 2018. This will allow eligible individuals to avoid unintentionally breaching the concessional contributions cap. This will assist in simplifying their ongoing tax obligations.
Default insurance on superannuation
The Government proposes to amend the default insurance arrangement on superannuation funds. Members who are less than 25 years old, with a balance of less than $6,000 and an account which has been inactive, will be able to “opt-in” for insurance cover, rather than it being a default arrangement.
This is a positive result – saving younger people from paying for insurance they may not need or want at their given stage in life.