No substantial changes to superannuation, stable weather conditions!
The Government has announced no substantial changes to the superannuation system under the Budget.
The only change with any major impact was announced prior to the Budget in relation to the eligibility age to contribute to superannuation
Otherwise, the Government has left the superannuation system unchanged after the implementation of the last substantial reforms on 1 July 2017. This is welcome, as constant change can be counter productive for Australians engaged in retirement planning.
- No substantial changes to superannuation, stable weather conditions!
- Proposed extended ability to contribute for 65 & 66 year olds, more flexibility
- Individuals born after 1 July 1955
No substantial changes to the Superannuation system
The Government has announced no substantial changes to the superannuation system under the Budget. The only change with any major impact was announced prior to the Budget in relation to the eligibility age to contribute to superannuation.
Otherwise, the Government has left the superannuation system unchanged after the implementation of the last substantial reforms on 1 July 2017. In some ways, this is welcome, as constant change can be counter productive for Australians engaged in retirement planning.
The Government is proposing that individuals will not be required to meet the work test until age 67 from 1 July 2020 (Age Pension age). This means that voluntary contributions can be made, and a tax deduction claimed up to the concessional limit of $25,000 to age 67. Non-concessional contributions of $100,000 can also be made before age 67 without meeting the work test, and the three year bring forward rule can be applied before age 67. This improves flexibility for older Australians.
Another measure will allow spouse contributions to be received up to age 74 (previously 65). The contributing spouse can claim an 18% tax offset on contributions up to $3,000.
The Government has announced a streamlining of the calculation of ECPI for superannuation funds from 1 July 2020. This will simplify the current requirements, which will include the removal of the need for SMSFs that are wholly in pension phase to obtain an actuarial certificate.
This is a welcome announcement which will reduce the administrative red tape for many SMSFs.
This measure is currently before Parliament – to date this has not been voted on by either house. Given the proposed start date of 1 July 2019, if this does not pass before the election is called it is likely to be deferred.
A consultation paper was released by Treasury in relation to this measure. Significant negative feedback was provided by the industry in relation to the practical application of this measure. This proposal is likely to lapse after the election is called.
The Bill to give effect to this change is before the Senate, but is not scheduled for debate during the sitting days this week.
Extension of time to contribute
Margaret is 66 years of age and earns substantial income from an investment portfolio.For the year ending 30 June 2021, the removal of the work test will allow Margaret to contribute up to the concessional contribution limit (currently $25,000) to superannuation and claim a tax deduction.
Depending on her total superannuation balance and Margaret’s history of contributions, she may be eligible to contribute up to $300,000 of non-concessional contributions.
Under the current contribution arrangements Margaret would not be eligible to contribute without passing the work test.
Sandra (66) decides to contribute the maximum $3,000 to her retired husband Tom’s (73) super fund, allowing her to claim a $540 tax offset.
Phil is 65 years of age on 1 July 2021. During the 2021/22 financial year, he receives an inheritance of $500,000.Subject to his total superannuation balance and contribution history, Phil may be able to contribute $300,000 of the inheritance to superannuation as a non-concessional contribution.
Under current contribution arrangements, the maximum contribution would likely be $100,000, subject to meeting the work test or other conditions.