On Tuesday, 2 April 2019, Treasurer Josh Frydenberg handed down the 2019-20 Federal Budget. The Treasurer announced the first Budget surplus in more than a decade with $7.1 billion expected for 2019-20. The Government forecasts surpluses over the next 4 years - $11 billion in 2020-21; $17.8 billion in 2021-22; $9.2 billion 2022-23. That's a total of $45 billion of surpluses over the next 4 years.
This year's Budget, delivered a month earlier due to the upcoming Federal Election, with superannuation left largely untouched, the Government focused on further personal income tax cuts. This Budget will provide much-needed stability and flexibility for SMSF members while looking to reduce red tape.
The key changes proposed for SMSFs and superannuation are summarised below:
Work Test Exemption extends to members aged below 67
From 1 July 2020, the Government will increase the work test age to 67 to be aligned with the proposed age pension. This will allow voluntary superannuation contributions (both concessional and non-concessional) to be made by those aged 65 and 66 without meeting the work test from 1 July 2020. People aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring-forward rule.
Spouse contributions age limit increase
From 1 July 2020, the age limit for making spouse contributions will be increased from 69 to 74. Currently, those aged 70 and over cannot receive contributions made by another person on their behalf.
Simplified ECPI calculation
From 1 July 2020, Superannuation fund trustees will be allowed to calculate exempt current pension income (ECPI) on a preferred method basis.
Currently, some superannuation funds have a restriction on whether they can use the segregated method or proportionate method when calculating the ECPI. Funds which stop using the segregated method in an income year cannot go back to using it.
From 1 July 2020, an actuarial certificate will not be required for superannuation funds with solely retirement phase accounts.
SuperStream to be expanded to support Release Authorities and SMSF rollover delayed
SuperStream will be expanded to include the transfer of information and money between employers, superannuation funds and the ATO. This change will take effect from 31 March 2021.
Currently, SuperStream is used as an information reporting mechanism between employers and superannuation funds, particularly around employer contributions. From 31 March 2021, the ATO will have the ability to send electronic requests via SuperStream to superannuation funds for the release of money from a member's account.
To coincide with this change, SMSF rollovers in SuperStream will be delayed until 31 March 2021.
Superannuation Consumer Advocate
The government will undertake an expression of interest (EOI) process to identify options to support the establishment of a Superannuation Consumer Advocate.
This EOI would assist the government in understanding whether the advocate would be necessary, as well as whether industry bodies have capacity to assist in the role. The Advocate would assist in superannuation policy discussions by acting on behalf of superannuation consumers (or members). Additionally, the Advocate would be given financial assistance to be a leader in the superannuation system by providing education and assistance to members as they navigate the superannuation system.
Other Super Related Measures
Tax Integrity – More money for ATO to increase engagement and collect taxes
The Government will provide $42.1 million over four years to the ATO to increase activities to recover unpaid tax and superannuation liabilities. These activities will focus on larger businesses and high wealth individuals to ensure on-time payment of their tax and superannuation liabilities. The measure will not extend to small businesses.
Superannuation — permanent tax relief for merging superannuation funds
Since December 2008, tax relief has been available for qualifying superannuation funds that have merged. This allowed a deferral of capital gains or losses, similar to other scrip-for-scrip rollovers. This tax relief will be made permanent from 1 July 2020.
Offering Choice in Australian Defence Force Superannuation Scheme
The Government will extend Australian Defence Force Superannuation Scheme (ADF Super) membership eligibility to allow ADF Super members to choose to remain contributory members when they discharge from the Australian Defence Force.
Protecting your super package amendments
As witnessed in the most recent sitting period of Parliament, the Government agreed to amendments to the Protecting Your Super Package announced in the 2018-19 Budget to:
- extend the period after which an account that has not received any contribution is considered inactive to 16 months;
- expand the definition of when an account is considered active for the ATO-led consolidation regime; and
- require the ATO to consolidate to an active account, where possible, within 28 days of receipt.
The Government will also delay the start date for ensuring insurance within superannuation that is only offered on an opt-in basis for accounts with balances of less than $6,000 and new accounts belonging to members under the age of 25 years to 1 October 2019.