The federal budget wasn’t expected to be overflowing with changes to superannuation and yet the outcome delivered by the Treasurer, Josh Frydenberg confirmed this to be the case.
We had already seen the Government announce a measure from 1 July 2020 to boost the ability for members aged 65 and 66 to be able to make concessional and non-concessional contributions without requiring a work test. You can read more about this in our article, Government announces federal budget super boost.
So what else was announced impacting SMSFs? There were predominantly three key measures that have a direct impact on SMSFs, including:
Superannuation — improving flexibility for older Australians
As indicated above, the Government will allow voluntary superannuation contributions (both concessional and non-concessional) to be made by those aged 65 and 66 without meeting the work test from 1 July 2020. People aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring-forward rule.
Furthermore, those 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. This measure is estimated to reduce revenue by $75.0 million over the forward estimates period.
Currently, people aged 65 to 74 can only make voluntary superannuation contributions if they declare that they have satisfied the ‘work test’ – having completed working a minimum of 40 hours over a 30 day period in the relevant financial year.
Those aged 65 and over cannot access bring-forward arrangements and those aged 70 and over cannot receive spouse contributions. 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.
Superannuation — reducing red tape for superannuation funds
The Government will reduce costs and simplify reporting for superannuation funds by streamlining some administrative requirements for the calculation of exempt current pension income (ECPI).
The Government will allow super fund trustees with interests in both the accumulation and retirement phases during an income year to choose their preferred method of calculating ECPI. This can effective eliminate the need to deal with deemed segregation periods and effectively choose whether a fund wants to obtain an actuarial certificate for an entire income year.
The Government will also remove a redundant requirement for super funds to have to obtain an actuarial certificate when calculating ECPI using the proportionate method, where all members of the fund are fully in the retirement phase for all of the income year (effectively requiring an actuary certificate for 100% tax exemption).
This measure will start on 1 July 2020 and is estimated to have no revenue impact over the forward estimates period.
Reducing costs for super industry by including superannuation release authorities in electronic SuperStream Rollover standard
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 Australian Taxation Office (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.
As a result of this change, the start date of SMSF rollovers in SuperStream will be delayed until 31 March 2021 to coincide with the expansion of the SuperStream Rollover Standard.
To find out more, visit the Federal Budget website.