As part of the Federal Budget, the Government’s Your Future, Your Super reforms have been announced. Provided the measures are passed by Parliament, by 1 July next year, the following changes will take effect.
Stapling Employees to a Super Fund for Life
Employees will keep their super fund when they change jobs, and thus stop the creation of unintended multiple super accounts and the erosion of super balances.
Employers will pay super to an employee’s existing super fund unless the employee selects an alternative fund. Employers will obtain information about an employee’s existing super fund from the ATO by logging onto ATO online services.
If an employee does not have an existing super account and does not make a decision regarding a fund, the employer will pay the employee’s superannuation into their nominated default fund.
YourSuper Comparison Tool
A new, interactive, online comparison tool will help members decide which super product best meets their needs. The YourSuper tool will:
Provide a table of simple super products (MySuper) ranked by fees and investment returns.
Link to super fund websites where members can choose a MySuper product.
Show a member’s current super accounts and prompt them to consider consolidating if they have more than one.
Annual Super Fund Performance Test
MySuper products will be subject to an annual performance test.
If a fund is determined to be underperforming, it will need to tell its members of its underperformance by 1 October 2021.
When funds communicate their underperformance to members, they will also be required to provide information about the YourSuper comparison tool.
Underperforming funds will be listed as underperforming on the YourSuper comparison tool until their performance improves.
Funds that fail two consecutive annual underperformance tests will not be permitted to accept new members. These funds will not be able to re-open to new members unless their performance improves.
By 1 July 2022, annual performance tests will be extended to other superannuation products.
New Best Financial Interests Test for Trustees
Trustees will be required to comply with a new duty to act in the best financial interests of members.
Trustees must demonstrate that there was a reasonable basis to support their actions being consistent with members’ best financial interests.
Trustees will provide members with key information regarding how they manage and spend their money in advance of Annual Members’ Meetings.
The Federal Budget did not announce any change to early release arrangements, freezing the SG, or launching an insurance review.
IQ have been full steam ahead in working through the many changes that are happening within the superannuation industry and our clients are well and truly supported by our consultants as we work through the challenges at play whilst in the midst of a global pandemic. Australians deserve a top-class retirement income system and, whilst some changes on the horizon require careful consideration and negotiation in order to ensure better outcomes for all, we are heading in the right direction.
In a welcome respite from years of major changes, there wasn’t much in last night’s Federal Budget about superannuation. The few changes were relatively minor and non-controversial, including:
Permanent Capital Gains Tax relief for merging super funds
Relaxed contribution rules for older Australians
Increased funding for regulators
Adjustments to reflect the final Protecting Your Super Act
Establishment of a Superannuation Consumer Advocate
The changes announced in the Budget require legislation. Parliament will sit for the next few days, but an election on 11 May is likely to be called on this coming Sunday or Monday.
We have detailed the superannuation changes in the Budget below:
The Government has announced permanent Capital Gains Tax relief for merging funds. Previously, this relief has been granted on a temporary basis. There are likely to be significant fund mergers in the near future and this will ensure some members receive an increased benefit.
From 1 July 2020, 65 and 66 year-olds will be able to make voluntary contributions (both concessional and non-concessional) to their superannuation without having to meet a work test. Currently, people aged 65 and over have to work for a minimum 40 hours over a 30 day period in the relevant financial year.
People aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring-forward rule. People up to and including age 74 will be able to receive spouse contributions, with those 65 and 66 no longer needing to meet a work test. Currently, people aged 65 to 74 can only make voluntary contributions if they work a minimum of 40 hours over a 30 day period in a financial year. People aged 65 and over cannot access bring-forward arrangements and those aged 70 and over cannot receive spouse contributions.
The Government says that 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.
The Government will provide $42 million over the next few years for the ATO to recover unpaid tax and superannuation liabilities including from large corporate entities and high wealth individuals.
They will ramp up regulator spending by more than $640 million, including:
over $400 million to ASIC to support its new enforcement and supervisory strategies
over $150 million to APRA to strengthen supervision and enforcement
over $35 million for a new criminal jurisdiction of the Federal Court.
As a result of the Government agreeing to amendments to the Protecting Your Super Package the Budget was amended to take account of:
extending to 16 months the period after which an account that has not received any contribution is considered inactive;
expanding the definition of when an account is considered active for the ATO-led consolidation regime; and
requiring the ATO to consolidate to an active account, where possible, within 28 days of receipt.
The Government has also announced its intention to establish a Superannuation Consumer Advocate and called for expressions of interest.
We would love to hear what you think of the changes announced in the Federal Budget. Leave us your thoughts and comments below. If you would like to find out more about how these changes will impact you, you can contact us at enquiries@iqgroup.com.au.
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