Scott Morrison’s third budget is headlined by $140 billion in tax cuts over the next decade, immediate tax relief of up to $1,060 a year for middle-income households and a fundamental reform of the tax system. It definitely has a feel of a pre-election budget.
Below is a summary of the changes that may affect your Super or SMSF.
Insurance in super
Date of effect: 1 July 2019 In many super funds, including MySuper and employer funds, insurance is offered as a default option. It’s proposed that members will need to ‘opt-in’ for insurance where they:
have a balance less than $6,000
are new members under age 25, or
have an account which has not received a contribution in 13 months and are considered inactive.
This the flow of effect of this change will see the balance of young peoples super accounts boost long term - but we may also see those who are uninsurable, and who had a number of super funds for the insurance lose their cover here!
Protection for small super balances Date of effect: 1 July 2019 Measures will be introduced to reduce the impact of fees on low super balances and focus on returning lost super to members.
Protection will be provided to super accounts by limiting administration and investment fees to a 3% annual cap. This cap will apply to accounts with balances below $6,000.
Exit fees will also be banned on all super accounts.
A $6,000 threshold will apply to inactive accounts. These accounts will need to be transferred to the ATO. The ATO will increase data matching activities to return amounts to active accounts held by members.
We will really see the flow on effect of this in years to come, as fees on old super accounts wont be eating into fund balances as much! It is still important to consolidate your super - if you want a hand get in touch!
Personal deductions Date of effect: 1 July 2018 The ATO will develop new compliance processes for taxpayers claiming a deduction for personal superannuation contributions. This includes raising awareness regarding the necessary steps, including lodging a ‘notice of intent to claim a tax deduction’ form with the super fund trustee.
We have a number of self employed people who weren't aware of their here, so this is a great step forward. requirements
Inadvertent concessional cap breaches Date of effect: 1 July 2018 Employers are required to pay Superannuation Guarantee (SG) based on an individual employee’s income. For some individuals this means their concessional contribution cap is breached by the total of multiple employers’ compulsory contributions.
Individuals who have a total income exceeding $263,157 pa and multiple employers will have the option to elect to no longer have SG contributions paid on certain income from their employer. This overcomes the inadvertent breach of the concessional contribution cap and associated tax penalties.
If your are a high income earner, or get large bonuses this is a great addition to the budget, saving a lot of stress.
Catch-up concessional contributions
Legislated super changes post 1 July 2018 Where the annual concessional contribution (CC) cap is not fully utilised from 1 July 2018, it may be possible to accrue unused amounts for use in subsequent financial years.
The CC cap is currently $25,000 pa1. Counted towards this limit are all employer contributions (including super guarantee and salary sacrifice), personal tax deductible contributions and certain other amounts.
Unused cap amounts can be accrued for up to five financial years. 2019/20 is the first financial year it will be possible to use carried forward amounts.
To be eligible, individuals cannot have a total super balance exceeding $500,000 on the previous 30 June. 1. This cap applies in FY 2017/18 and 2018/19. It may be indexed in future financial years.
If you're trying to get as much money into super as you can, or you've had a few years off work and want to catch up, this can be a great strategy when preparing for retirement.
SMSF SMSF increase in member numbers
Date of effect: 1 July 2019
Self-managed superannuation funds (SMSFs) are limited to having four members. This threshold will increase to six to provide greater flexibility and allow families, for example, to all be members of the same SMSF.
For most people this will have little or no impact.
SMSF three-year audit cycle
Date of effect: 1 July 2019
SMSFs with a history of good record-keeping and compliance will move from providing an audit on an annual basis to a three-yearly cycle. Eligible SMSFs will be those with a history of three consecutive years of clear audit reports and have lodged annual returns on time.
For those of you with an SMSF, this could decrease the running costs and effort each year for the fund. We may also see Audit fees increase due to the fact Auditors will need to do 3 years of work, not 1.
Any advice in this Federal Budget Analysis has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs. Any tax estimates provided in this publication are intended as a guide only and are based on our general understanding of taxation laws. They are not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.