Additional voluntary contributions allowable for 65 & 66 year olds
The Government will allow voluntary superannuation contributions (both concessional and non concessional) to be made by individuals aged 65 and 66 without meeting the work test from 1 July 2020. Individuals aged 65 and 66 will also be able to make up to three years of non concessional contributions under the bring forward rule. Further, the age limit for receiving spouse contributions will be increased to age 74 (inclusive). These measures are estimated to reduce revenue by $75.0 million over the forward estimates period.
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 financial year in which the contributions are made (the “work test”). Those aged 65 and over cannot access bring forward arrangements. Further, 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 flexibility to save for retirement.
Insurance opt-in for low value and new accounts held by young people
The Government will delay the start date to 1 October 2019 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.
These changes (currently before Parliament as part of the Treasury laws Amendment (Putting Members’ Interests First) Bill 2019) aim to 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 are essentially a re-introduction of some amendments removed from the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 in order to pass that Bill promptly.
Merging Super Funds
The Government has announced it will make permanent the current tax relief for merging superannuation funds that is due to expire on 1 July 2020. The current measure (which has been in place since October 2011 and was itself an extension of a prior measure introduced in 2008) provides tax relief for superannuation funds to transfer revenue and capital losses to a new merged fund, and to defer taxation consequences on gains and losses from revenue and capital assets.
The tax relief will be made permanent from 1 July 2020, ensuring superannuation fund member balances are not affected by tax when funds merge. It will remove tax as an impediment to mergers and facilitate industry consolidation, consistent with the recommendation of the Productivity Commission’s final report, Superannuation: Assessing Efficiency and Competitiveness. The Government considers that consolidation of superannuation will help address inefficiencies by reducing costs, managing risks and increasing scale, leading to improved retirement outcomes for members.
Exempt current pension income calculation to be simplified
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). Currently, there are two methods to work out the ECPI for a complying superannuation fund: the segregation method (which segregates specific assets which are then set aside to meet current pension liabilities); and the proportionate method (which exempts a proportion of assessable income attributable to current pension liabilities).
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.
This will also involve removing a redundant requirement for superannuation funds to obtain an actuarial certificate when calculating ECPI using the proportionate method, as long as all members of the fund are fully in the retirement phase for all of the income year.
This measure will start on 1 July 2020.
Release authorities to be included in SuperStream Rollover standard
The Government will provide $19.3 million over 3 years from 2020-21 to the ATO to send electronic requests to super funds for the release of money required under various superannuation arrangements, including early release.
This measure will start from 31 March 2021, and will be implemented by expanding the electronic SuperStream Rollover Standard used for the transfer of information and money between employers, superannuation funds and the ATO.
The start date for self-managed super funds to use SuperStream for rollovers will be delayed until 31 March 2021 to coincide with the expansion of the SuperStream Rollover Standard.
Australian Defence Force Superannuation Scheme (ADF Super) membership eligibility
The Government will extend ADF Super membership eligibility to allow ADF Super members to choose to remain contributory members when they discharge from the Australian Defence Force. This will bring ADF Super arrangements in line with superannuation arrangements in broader industry and other public superannuation schemes.
Superannuation Consumer Advocate to be established
The Government will undertake an expression of interest process to identify options to support the establishment of a Superannuation Consumer Advocate. The Advocate would provide input on behalf of consumers in policy discussions and provide information to educate and assist customers to navigate the superannuation system.
Amendments to Protecting Your Super Package
The Government has recognised the final amendments which were passed as part of the Protecting Your Super Package, originally announced in the 2018-2019 Budget to:
- extend to 16 months the period after which an account that has not received any contribution is considered to be inactive;
- expand the definition of when an account is considered active for the ATO-led consolidation regime; and
- require the ATO to consolidate an active account, where possible, within 28 days of receipt.
Superannuation Complaints Tribunal – completion of casework
The Government will provide an additional $2.3 million over three years from 2020-21 to ASIC for the Superannuation Complaints Tribunal (SCT) to resolve outstanding complaints by 31 December 2020, when the SCT will cease operations. This follows on from the delayed commencement of the Australian Financial Complaints Authority.
The cost of this measure will be offset by a corresponding increase in the APRA Financial Institutions Supervisory Levies.