Federal Budget was relatively quiet on superannuation this year. Not surprising given that we have just been through the most comprehensive reforms since 2007. However, there were a few items to be aware of and which may offer some planning opportunities.
1. Work Test exemption for Recent Retirees
With effect from 1 July 2019 people aged between 65 and 74 with superannuation balances below $300,00 will be exempt from all the work test for voluntary contributions (i.e. non concessional contributions only) in the first year that they do not meet the work test requirements.
2. Protecting your Super
The Government announced 3 measures to assist in protecting superannuation balances. The measures to take effect from 1 July 2019 are:
- complete ban on exit fees on all superannuation accounts
- introduction of a 3% annual cap on passive fees charged by superannuation funds on accounts with balances below $6,000
- the Government will require the transfer of all inactive superannuation accounts where the balances are below $6,000
- Insurance within superannuation will move from a default framework to be offered on an “opt-in” basis for members with low balances of less than $6,000, members under the age of 25 years and members whose accounts have not received a contribution in 13 months and are inactive.
3. Notice of Intention to Claim Tax Deduction for Concessional Contributions
Where an individual makes a personal concessional superannuation contribution to a fund they are required to provide their superannuation fund with a completed and signed Notice of Intention to Claim a Tax Deduction prior to the lodgement of their personal tax return.
Where the tax payer makes the claim for the deduction but fails to let their superannuation fund know by lodging the Notice of Intention, the superannuation fund does not withhold and remit to the ATO the 15% contributions tax.
The Government is providing additional funding to the ATO to increase audit activity to ensure that taxpayers are complying with the requirements when claiming personal concessional contributions.
4. Increasing Maximum Number of Members in a SMSF and a Small APRA Fund
At present the maximum number of members allowed in a SMSF or a Small APRA fund is limited to 4 members. From 1 July 2019 the maximum number of members will increase from 4 to 6.
5. Preventing inadvertent concessional cap breaches by certain employees
Individuals whose annual income exceeds $263,157 and have multiple employers will be able to nominate that their wages from certain employers are not subject to the superannuation guarantee. This will have effect from 1 July 2018 and will allow those individuals affected to avoid unintentionally breaching the $25,000 annual concessional cap.
6. Audits and SMSF
With effect from 1 July 2019 the Government will change the annual audit requirement to a 3 yearly requirement for SMSFs with a history of good record-keeping and compliance. Those SMSFs that qualify will be those SMSFs that have:
- a history of 3 consecutive years of clear audit reports; and
- lodged the Fund’s annual return in a timely manner.
7. Retirement Income Strategy
The Government will amend the Superannuation Industry (Supervision) Act 1993 to introduce a covenant that will compel Superannuation trustees to formulate a retirement income strategy for superannuation fund members.
While Many already do this and monitor their retirement income and savings on a regular basis this proposed legislative intervention will add a compliance cost to the cost of maintain a SMSF.
If you would like further information about how the Federal Budget will impact your superannuation please contact the office 03 9629 1433