A person aged 65 to 74 is currently able to make contributions to superannuation if the ‘work test’ has been satisfied (ie. they have worked at least 40 hours in 30 consecutive days) in the financial year the contribution is made. A one-year exemption from the work test will apply to older Australians who have less than $300,000 in total super savings. This exemption will apply to the financial year following the last year the work test was satisfied. This will allow an additional period for those eligible to contribute to super.
Insurance in super
Date of effect: 1 July 2019
In many super funds, including MySuper and employer funds, insurance is offered as a default option. It’s proposed that members will need to ‘opt-in’ for insurance where they:
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have a balance less than $6,000
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are new members under age 25, or
- have an account which has not received a contribution in 13 months and are considered inactive.
Protection for small super balances
Date of effect: 1 July 2019
Measures will be introduced to reduce the impact of fees on low super balances and focus on returning lost super to members.
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Protection will be provided to super accounts by limiting administration and investment fees to a 3% annual cap. This cap will apply to accounts with balances below $6,000.
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Exit fees will also be banned on all super accounts.
- A $6,000 threshold will apply to inactive accounts. These accounts will need to be transferred to the ATO. The ATO will increase data matching activities to return amounts to active accounts held by members.
Personal deductions
Date of effect: 1 July 2018
The ATO will develop new compliance processes for taxpayers claiming a deduction for personal superannuation contributions. This includes raising awareness regarding the necessary steps, including lodging a ‘notice of intent to claim a tax deduction’ form with the super fund trustee.
SMSF increase in member numbers
Date of effect: 1 July 2019
Self-managed superannuation funds (SMSFs) are limited to having four members. This threshold will increase to six to provide greater flexibility and allow families, for example, to all be members of the same SMSF.
Social security
Pension Loans Scheme
Date of effect: 1 July 2019
The Pension Loans Scheme allows eligible individuals to access some of the equity in the home or other property via a Government loan, which is advanced in fortnightly instalments. This scheme will be available to all Australians over Age Pension age and the maximum loan payments will increase to 150% of the full Age Pension. Eligibility will continue to be limited by the value of the property used as loan security. The following table summarises payment ranges for singles and couples based on current rates, where the full pension and no pension is available.
Work Bonus
Date of effect: 1 July 2019
Under the Work Bonus, the first $300 per fortnight (currently $250) of employment income will not count when calculating Age Pension entitlements under the income test.
Self-employed retirees will be able to access the scheme for the first time. A ‘personal exertion test’ will ensure the bonus only applies to income earned from paid work. Any unused Work Bonus (up to a total of $7,800 pa) can continue to be accrued to reduce assessable employment income in a future period.
Means testing of Carers Allowance
Date of effect: To be confirmed by Government
As previously announced, the Carer Allowance and Carer Allowance (child) Health Care Card will be income tested. Households earning over $250,000 won’t be eligible. Both existing and new recipients of Carer Allowance will need to meet this income test.
Legislated super changes post 1 July 2018
Downsizer contributions
Individuals aged 65 or older may be able to make super contributions of up to $300,000 (or $600,000 per couple) from 1 July 2018 when selling their home. These contributions, known as ‘downsizer contributions’ can be made without having to meet a ‘work test’ or ‘total super balance test’ and they don’t count towards the contribution caps. However, they must be made with 90 days of settlement and a tax deduction can’t be claimed. The property must have been owned for at least 10 years and have been the main residence at some time during this period.
First home super saver scheme - access
First home buyers who have made super contributions under the First Home Super Saver Scheme (FHSSS) can access their money from 1 July 2018. The FHSSS started on 1 July 2017 and allows eligible first home buyers to save a deposit in the concessionally taxed superannuation system. Contributions of up to $15,000 per year (and a total of $30,000) can be made and they count towards the relevant contribution cap.
Catch-up concessional contributions
Where the annual concessional contribution (CC) cap is not fully utilised from 1 July 2018, it may be possible to accrue unused amounts for use in subsequent financial years. The CC cap is currently $25,000 pa1. Counted towards this limit are all employer contributions (including super guarantee and salary sacrifice), personal tax-deductible contributions and certain other amounts.
Unused cap amounts can be accrued for up to five financial years. 2019/20 is the first financial year it will be possible to use carried forward amounts. To be eligible, individuals cannot have a total super balance exceeding $500,000 on the previous 30 June.
This measure could help those with broken work patterns and competing financial commitments to better utilise the CC cap. It could also help to manage tax and get more money into super when selling assets that result in a capital gain.
Important information
The information contained in this Federal Budget Analysis is current as at 8 May 2018. Any advice in this Federal Budget Analysis has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs. Any tax estimates provided in this publication are intended as a guide only and are based on our general understanding of taxation laws. They are not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.