Amendments to the protecting your super package continue
The Government has agreed to amendments to the Protecting Your Super Package announced in the 2018-19 Budget.
The following changes will be introduced:
- extend to 16 months the period after which an account that has not received any contribution is considered inactive
- expand the definition of when an account is considered active for the ATO-led consolidation regime
- require the ATO to consolidate to an active account, where possible, within 28 days of receipt.
The Government will delay the start date for ensuring insurance within superannuation 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. This measure is estimated to reduce the fiscal balance by $41.8 million over the forward estimates period.
These changes (currently before Parliament) will protect the retirement savings of young people and those with low balances by ensuring their superannuation is not unnecessarily eroded by premiums on insurance policies they do not need or are not aware of. The changes will also reduce the incidence of duplicated cover so that individuals are not paying for multiple insurance policies, which they may not be able to claim on.
These changes will not prevent anyone who wants insurance from being able to obtain it. Low balance and young members will still be able to opt-in to insurance cover in superannuation.
Improved eligibility to make contributions for older Australians
The Government has introduced measures to give older Australians greater flexibility to save for retirement.
In a welcome move, the Government 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. The bring forward rules currently allows individuals aged less than 65 years to make 3 years’ worth of non-concessional contributions (capped at $100,000 a year) in a single year. Those up to and including age 74 will be able to receive spouse contributions, with those 65 and 66 no longer needing to meet a work test.
Around 55,000 people aged 65 and 66 are expected to benefit from this reform in 2020-21. The existing annual caps for concessional contributions and non-concessional contributions ($25,000 and $100,000 respectively) will continue to apply.
Currently, people aged 65 to 74 can only make voluntary superannuation contributions if they self-report as working a minimum of 40 hours over a 30-day period in the relevant financial year. Those aged 65 and over cannot access bring-forward arrangements and those aged 70 and over cannot receive spouse contributions.
Aligning the work test with the eligibility age for the Age Pension (scheduled to reach 67 from 1 July 2023) and increasing the age limit for spouse contributions to 74 will give older Australians greater opportunity to contribute to super.
Reducing red tape for superannuation funds
Starting from 2020, the Government will reduce costs and simplify reporting for superannuation funds by streamlining some administrative requirements for the calculation of exempt current pension income (ECPI). The Government will allow superannuation fund trustees, with interests in both the accumulation and retirement phases during an income year, to choose their preferred method of calculating ECPI.
The Government will also remove a requirement for superannuation funds to obtain an actuarial certificate when calculating ECPI using the proportionate method, where all members of the fund are fully in the retirement phase for all of the income year.
While this budget does promise to reduce administrative costs and the opportunity for better tax planning outcomes, all in all, it is a quiet budget for the superannuation sector as opposed to prior years.
Energy assistance payment to combat rising living costs along with changes to ADF pensions
The Government will provide $284.4 million over two years from 2018-19 to make a one-off Energy Assistance Payment of $75 for singles and $62.50 for each member of a couple eligible for qualifying payments on 2 April 2019 and who are resident in Australia. Qualifying payments are the age pension, carer payment, disability support pension, parenting payment single, the veterans’ service pension and the veterans’ income support supplement, veterans’ disability payments, war widow(er)s pension, and permanent impairment payments under the Military Rehabilitation and Compensation Act 2004 (including dependent partners) and the Safety, Rehabilitation and Compensation Act 1988. This measure builds on the 2017-18 budget measure, entitled Energy Assistance Payment.
The Government will also provide $6.2 million over four years from 2019-20 (and $1.4 million per year ongoing) to ensure equal treatment of former spouses and former de-facto partners of veterans concerning access to the partner service pension when they separate from their veteran partner. Both former spouses and former de-facto partners of veterans will be able to continue to receive the partner service pension after their relationship with their veteran partner has ended, including as a result of family or domestic violence.
The Government will also 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 ADF. This will align ADF Super arrangements with superannuation arrangements available in broader industry and other public superannuation schemes.