Inside or Outside Super? Strategies for High Net Worth Investors
In life, change is the constant. Our personal circumstances change, unexpected surprises crop up and our priorities shif...
Happily the 2019 Federal Budget was a quiet one for superannuation.
Currently to make a voluntary super contribution over the age of 65, you have to meet a work test (have worked more than 40 hours in a 30 day period during the year of contribution). The Government has announced that there will no longer be a work test for those aged 65 and 66. This will allow older Australians to make both concessional and non-concessional contributions to super while aged 65 and 66, even if they are retired. Contributors will also be able to take advantage of the bring forward rule to make three years’ worth of contributions in one year.
The measure in part brings the contribution rules into line with the Age Pension age of 67 (from 2023) The contribution changes will commence from 01 July 2020 and will benefit around 55,000 Australians in the first year, costing around $75 million over the forward estimates.
This is a sensible measure however we had hoped to see contributions available to anyone up to the age of 75 without having to meet a work test.
A non-working spouse will now be able to receive contributions from their spouse up to the age of 74, regardless of their work status. Under the new rules the contributing spouse will not have to meet a work test if under the age of 66 but will have to if aged 67 to 75.
Currently, those aged 70 years and over cannot receive contributions made by another person on their behalf.
The Government will streamline administrative requirements for the calculation of exempt current pension income (ECPI).
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 is a welcome change that will reduce unnecessary red-tape for SMSFs in pension phase.
The Government has announced that they will delay the start date for ensuring that insurance within super is only offered on an opt-in basis for those with less than $6,000 in super or for those aged under 25 with new accounts, until 01 October 2019. The measure is already currently before parliament and is designed to protect the retirement savings of Australians who are younger or have low super balances.
All super members will still be able to apply for insurance via their super, on an opt-in basis.
Unfortunately Australians are under insured and for many in the work force, their only insurance is that held via their super funds. Those with low balances or under the age of 25, need to carefully consider whether they require insurance inside their super fund. For younger workers the most important insurance is Income Protection insurance and the two year benefit offered via super is often an important first step in protecting yourself in the event of an illness or accident that prevents you from working.
The Government will provide $19.3 million over three years from 2020-21 (including $12.6 million in capital funding in 2020-21) to the ATO to send electronic requests to superannuation funds for the release of money required under a number of superannuation arrangements. This change, which will take effect from 31 March 2021, 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 of Self-Managed Superannuation Funds rollovers in SuperStream will be delayed until 31 March 2021 to coincide with the expansion of the SuperStream Rollover Standard.
Anyone who has attempted to rollover super from one fund to another, will know that the current process is long winded, laborious and paper based. If you are trying to amalgamate multiple super funds into one, then it is even more frustrating as the process is not standardised between funds.
The proposed Superstream Rollover standard should see a great improvement in the rollover process and make it much easier to move your super.
Check out our 2018 budget summaries:
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