It’s been two years since the Liberal government placed a cat among the retirement-saving pigeons with sweeping changes to the amount of wealth that could be stored in superannuation accounts.
Super saving may not be front and centre of Scott Morrison’s messaging this year, but the 2018 budget papers also contain a range of changes that will alter the way employees and business owners of all ages can save for their retirements.
A number of these are aimed at stopping young workers’ savings from being zapped by insurance charges and fees before they have even started to properly accumulate funds.
Other tinkering around the edges of the system will give DIY super fund holders some more freedom for how they organise their affairs.
Here’s a quick look at the key changes and how they’ll affect your savings.
ATO resources to chase unpaid super
As SmartCompany reported yesterday, the Australian Taxation Office has been given $134 million to chase unpaid tax debts, with some of these funds to also go towards chasing unscrupulous employers who don’t pay super.
“The measure will ensure the ATO is able to continue to target those taxpayers gaining an unfair financial advantage over those who pay their fair share of tax and superannuation,” according to the budget papers.
For employers, this means there will be greater scrutiny on paying workers’ super in a timely manner. For workers, the strategy aims to see more companies taken to task when super isn’t paid.
In addition, the budget also introduced a measure that will mean all inactive superannuation accounts with balances below $6000 will also be transferred to the Australian Tax Office, which will then use data matching processes to locate the owners of those accounts and return them.
Changes to the work test for recent retirees
As part of the government’s plan to help older Australians with employment security, there will be a new exemption introduced to ‘work test’ requirements for recent retirees who want to contribute to super.
This means that from July 1, 2019, Australians aged between 65 and 74 will not have to satisfy ‘work test’ requirements if they want to contribute to super in the first year after they have retired, provided their balances are $300,000 or less.
At present, workers aged between 65 and 74 can make voluntary super payments if they are working a minimum of 40 hours in any 30-day period. The one-year exemption from this test means recent retirees will be able to “get their financial affairs in order” by still being able to contribute to super in the first year of their retirement. The budget papers say this will cost the government $100 million over the forward estimates
Insurance to become opt-in for younger super savers
The government also plans to put limits on how super funds can offer insurance to certain cohorts of super members.
This means instead of funds offering default arrangements like life insurance to all members, this will now be offered on an opt-in basis for those with super balances under $6000, members who are aged 25 or younger, and for any account that has been inactive for 13 months or more. This is designed to stop retirement savers from paying for multiple insurance policies when they don’t need them, or having insurance premiums suck up their savings when they don’t actually need the policy.
The changes will come in on July 1, 2019 and are expected to lead to a $670 million gain to the budget over forward estimates.
The government also plans to ban exit fees on all superannuation funds from July 1, 2019. And there will be a 3% annual cap on passive fees charged by superannuation funds for accounts with balances under $6000.
Increasing the number of SMSF members
In what could be a win for small business owners, the maximum number of members that can be in one self-managed super fund will be changed from four to six.
“This will provide greater flexibility for joint management of retirement savings, in particular for large families,” according to the budget papers.
Changes to regulatory anomalies
Relaxing audits for compliant SMSFs
The government plans to change auditing requirements for SMSFs so that ‘well-behaved’ accounts will only have to conduct audits every three years, instead of each financial year.
Superannuation savers will be able to access the new audit timeslines provided they have displayed three years of good audit results in a row.
“This measure will reduce red tape for SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged the fund’s annual returns in a timely manner,” the budget papers say.
Preventing a breach of the contribution caps
If you’re a high flyer with multiple jobs, you may have previously run the risk of breaching the concessional super contribution cap if you are on high salaries or have multiple employers all paying the superannuation guarantee.
From July 1, employees on salaries $263,157 or higher will be able to direct one of their employers to not pay them super, with the aim of avoiding the tax penalties that come if you contribute $25,000 a year or more in pre-tax contributions.
More changes for women in super on the way
As announced by Kelly O’Dwyer earlier this week, there is also cash set aside for September when she will unveil a comprehensive ‘Women’s Economic Plan’, which will reportedly contain more measures to help close the superannuation gender gap.
These changes are expected to build upon the government’s previous plan to allow the rollover of the unused portion of concessional contribution amounts, which could allow women or those taking time out of the workforce to contribute to super at a later date.