Now that we have had more than a week to allow the surprise election result to sink in, we thought we would recap on the current state of play, specifically around the superannuation provisions.
You will be relieved to hear that after the introduction of significant legislative changes which primarily came into effect on 1 July 2017, the Government has indicated an intended policy of ‘stability’ for the superannuation industry with no new measures being planned. So, hopefully we will have an opportunity to consolidate for at least the next three years.
We are sure everyone was aware of the controversial franking credit proposal put forward by the opposition which denied cash refunds on imputation credits. A measure which was highly prejudicial against Self Managed Super Funds (“SMSF”) and will now clearly not proceed.
There was however a number of less well known superannuation measures announced by the ALP which will also not proceed, at least for now, these were:
• Reduction in the non concessional contribution cap from $100,000 to $75,000;
• Reduction in the Div 293 Tax Income Threshold from $250,000 to $200,000;
• Removal of the catch up concessional contributions measure;
• Removal of the tax deductibility of personal contributions without meeting the 10% rule;
• Removal of the freeze on the increase in the rate of Superannuation Guarantee (“SG”) from 9.5% to 12%;
• Phase out of the $450 minimum monthly income threshold for SG contribution eligibility; and, importantly
• Banning the use of a Limited Recourse Borrowing Arrangement (“LRBA”) by an SMSF for the acquisition of property.
We anticipate the following policies which for the most part had been announced in the April budget will be implemented by the new Government:
• Guaranteeing no new taxes on superannuation;
• Greater flexibility for retirement contributions by allowing Australians aged 65 and 66 to be able to make voluntary superannuation contributions, both concessional and non-concessional, without meeting the work test (from 1 July 2020). Previously, this was only available to individuals below 65;
• The above measure will also extend 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;
• Streamlining the administrative requirements for the calculation of Exempt Current Pension Income (“ECPI”);
• Enabling the ATO to send electronic requests for the release of money required under a number of superannuation arrangements including SuperStream Rollovers; and
• Retaining LRBAs.
In addition to the above, following are some previously announced changes contained in Bills which lapsed when the previous Parliament was prorogued on 11 April 2019. We expect these will be reintroduced by the Government when Parliament returns sometime after July:
• For funds with LRBAs, the total value of superannuation assets being taken into account when calculating a member’s Total Superannuation Balance (“TSB”) in retirement, and pre-retirement where there is a related party loan;
• SG opt out which allows high income earners with multiple employers to opt out of receiving some SG contributions to enable them to avoid breaching the concessional contribution caps;
• Extension of the non arms length provisions to fund expenses which result in a penalty tax rate of 45% on related income;
• Increasing SMSFs to a maximum of 6 members; and
• Other measures including Insurance opt-out for members aged less than 25.
In addition to the above we think it unlikely that unpassed legislation regarding a 3 year audit cycle for SMSFs and the controversial SG amnesty will be reintroduced.
Should you have any questions in relation to Superannuation, please contact your WMS advisor.
DISCLAIMER: This article is intended to provide a general summary only and should not be relied on as a substitute for professional advice.