The Coalition wins a third term – what happens with superannuation now the dust has settled?
The Coalition Government was re-elected in the May 2019 Federal Election, with a small majority of seats in the House of Representatives, after taking, as one of its policies to the election, stability for superannuation.
After the introduction of the significant legislative changes which came into effect on 1 July 2017, you may be relieved to hear that for at least the next three years we hope to have sustained stability for super. You may also be relieved to hear the proposal to ban refunds for excess franking credits and other superannuation changes will not be implemented. This means that you can focus on managing your financial needs rather than worrying about changing rules.
Before the election, the Coalition did announce tweaks to the superannuation system that we anticipate will be implemented by the Government including:
- Guaranteeing no new taxes on superannuation.
- Greater flexibility for retirement contributions.
- From 1 July 2020, Australians aged 65 and 66 will now be able to make voluntary superannuation contributions, both concessional and non-concessional, without meeting the work test. Previously, this was only available to individuals below 65.
- This also includes extending access to the bring-forward arrangements to individuals aged 65 and 66 which allows individuals to make three years’ worth of non-concessional contributions to their super in a single year.
- Increasing the age limit for individuals to receive spousal contributions from 69 to 74.
- Reducing red tape for superannuation funds — exempt current pension income (ECPI) changes.
- The Government will streamline administrative requirements for the calculation of ECPI.
- Reducing costs for the super industry by including superannuation release authorities in electronic SuperStream Rollovers.
- The Government will provide $19.3 million over three years beginning in 2020-21 to the Australian Taxation Office (ATO) to send electronic requests to superannuation funds for the release of money required under a number of superannuation arrangements.
- Retaining limited recourse borrowing arrangements (LRBAs).
- Increasing the maximum number of SMSF members from four to six.
With the financial year just started there is no reason you can’t plan your superannuation strategy for the coming year. With certainty with the Government and its super policies it is the time to ensure you take advantage of the opportunities that are available. Following are some strategies that you may need to consider and ensure the plans you have in place are the best for you and your SMSF.
During this financial year you should:
- Review if you will have any income available to contribute to your fund; and
- Ensure your planned contributions are below the caps.
Non-concessional (after tax) contributions are limited to $100,000 for the 2020 financial year and concessional (before tax) contributions are limited to $25,000.
Members under 65 years of age have the option of contributing up to $300,000 over a three year period depending on their total super balance. Transitional arrangements also apply to individuals who brought forward their non-concessional contribution caps in the 2017-18 financial year.
Anyone making large superannuation contributions this year should exercise extreme care to avoid excess contributions. Making sure you do not exceed the contribution caps will save you both money and time of dealing with excess contributions.
Contributions are included in a financial year if they are received in your fund’s bank account during that financial year. You should ensure your contributions up to 30 June 2019 hit the bank account before Friday 28 June 2019. If they didn’t the contribution will count towards this year’s limits so you will need to be aware of that before you plan your 2020 financial year contributions.
Drawing superannuation pensions
If you are in pension phase, you need to ensure the minimum pension is paid to you during the financial year. Where these requirements have not been met your fund will be subject to 15% tax on your pension investments, rather than being tax free.
Personal superannuation contributions
Most people regardless of their employment arrangement, can claim a deduction for personal super contributions they make to their fund until they turn 75.
Individuals who are aged between 65 and 75 will need to meet the work test to be eligible to claim the deduction.
If you wish to claim a tax deduction for personal contributions, you must complete and lodge a notice of intent with your fund and have this notice acknowledged (in writing) by your fund.
If you meet the relevant work tests and earn less than $52,697, it is also worth considering if you can take advantage of the Government super co-contribution this coming financial year.
Rebalancing accounts between spouses
If the balances of your superannuation are not equal with your spouse you should look to take the opportunity to rebalance pension accounts between the two of you, to ensure that super balances are as even as possible and the $1.6 million transfer balance cap is maximised for each member.