While there were no superannuation tax changes announced last night the Government made some changes aimed at strengthening the integrity and efficiency of the superannuation system and reducing the compliance costs for SMSFs.

General superannuation changes

Work Test Exemptions for Contributions by Recent Retirees

Effective date: 1 July 2019

The superannuation contribution rules will be amended to allow people aged 65 to 74 that have a total superannuation balance of under $300,000 to make voluntary contributions for 12 months from the end of the financial year they last satisfied the work test. The will not need to meet the the ‘work test’ in that year. This will give people more time to make contributions to super after they have retired and finished working. The contribution caps will still apply, including the ability to use the catch-up concessional contribution rules which apply from the 2019/20 year.

Preventing inadvertent Concessional Cap breaches

Effective date: 1 July 2018

Individuals whose income exceeds $263,157 and who have multiple employers will be able to nominate that their salary from certain employers are not subject to the Superannuation Guarantee (SG). The employee will be able to negotiate to receive additional salary and wages to make up for the lost SG contributions. There is no detail available in relation to this so it is unclear how it will work in practice.

Improved integrity over deductions for personal contributions

Effective date: 1 July 2018

The ATO will modify income tax returns to require individuals to confirm they have provided a valid notice of intent to their fund when claiming a tax deduction for their personal contributions. This will ensure that any deductible contributions are appropriately taxed by superannuation funds.

Changes to fees and reuniting accounts

Effective date: 1 July 2019

A 3% annual cap on passive fees charged by all superannuation funds will be introduced on accounts with balances below $6,000 and exit fees on all superannuation accounts will be banned. Any inactive accounts with balances below $6,000 will be transferred to the ATO where they will be proactively reunited with a member’s active account.

Changes to insurance in superannuation

Effective date: 1 July 2019

Insurance in superannuation will move from a default framework to being offered on an opt-in basis for the following members:
Those with low balances of less than $6,000
Those under age 25
Those whose accounts have not received a contribution in 13 months and are inactive.

These changes are designed to protect the retirement savings of young people and those with low balances and will also reduce the incidence of duplicate cover.

Impacted members will have until 30 June 2019 to decide whether they will opt-in to the existing cover or allow it to switch off.

SMSF changes

Increasing the Maximum number of allowable members

Effective date: 1 July 2019

The Government will increase the maximum number of members in new and existing SMSFs and small APRA funds from four to six. This is aimed at providing greater flexibility for joint management of retirement savings, in particular for large families.

We note that only 7% of existing SMSFs have more than 2 members. The reason for this is that more members results in added complexity, the need for different investment strategies and may also increase the risk of trustee dispute.

Three yearly audit cycle for some SMSFs

Effective date: 1 July 2019

The Government will change the annual audit requirement to a three yearly requirement for SMSFs with a history of good record keeping and compliance. This measure will reduce red tape and compliance costs for SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged annual returns on time.

Follow the links to read about the sections that are relevant to you and if you have any queries about the impact of these announcements then please don’t hesitate to contact us.