In the May 2019 Federal Election, the Coalition Government emerged victorious and secured a narrow majority in the House of Representatives. One of their prominent election pledges was to ensure stability for superannuation, which garnered significant attention from accountants in Sydney and other stakeholders.
After introducing the significant legislative changes which took 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 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 can now 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, allowing individuals to make three years’ worth of non-concessional contributions to their super in a 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 to release money required under several superannuation arrangements.
- Retaining limited recourse borrowing arrangements (LRBAs).
- Increasing the maximum number of SMSF members from four to six.
Next steps
With the financial year just starting, 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 time to ensure you take advantage of the available opportunities. Following are some strategies you may need to consider and ensure the plans you have in place are the best for you and your SMSF.
Contribution caps
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 significant superannuation contributions this year should exercise extreme care to avoid excess contributions. Ensuring you do not exceed the contribution caps will save you money and time 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 would count towards this year’s limits, so you must know that before planning your 2020 financial year contributions.
Drawing superannuation pensions
In the pension phase, you must ensure the minimum pension is paid during the financial year. Where these requirements have not been met, your fund will be subject to a 15% tax on your pension investments rather than tax-free.
Personal superannuation contributions
Regardless of their employment arrangement, most people can claim a deduction for personal super contributions they make to their fund until they turn 75.
Individuals aged between 65 and 75 must 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.
Co-contributions
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
Suppose the balances of your superannuation are not equal to your spouse’s. In that case, you should 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.
Kreston Stanley Williamson Team
*Correct as of July 2019
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
