Thankfully, there were very few changes in this year’s Budget relating to superannuation, and in keeping with election promises no changes for the SMSF sector at all – a nice change from the last few years.
Shannon Rivkin and Chris Ayling have already created updates (here and here respectively), from market overview and accounting/tax perspectives, however I thought that a superannuation view would also be appreciated.
What’s new?
‘Stapled’ superannuation accounts – A new default system
From 1 July 2021, existing superannuation accounts will be ‘stapled’ to a member to avoid the creation of a new account when that person changes their employment. Employers will be required to pay super contributions to their employees existing superannuation fund if they have one, unless they select another fund. This helps to avoid the creation of new small super accounts when changing employers, which can become eroded by fees over time.
A ‘YourSuper’ portal
The Australian Taxation Office will develop systems so that new employees will be able to select a superannuation product from a table of MySuper products through the YourSuper portal. The YourSuper tool will provide a table of simple super products (MySuper) ranked by fees and investment returns.
Increased benchmarking tests on APRA funds
Benchmarking tests will be undertaken on the net investment performance of MySuper products, with products that have underperformed facing stringent requirements. Products that have underperformed over two consecutive annual tests will be prohibited from receiving new members until a further annual test that shows they are no longer underperforming.
Strengthening obligations on superannuation trustees – Large APRA funds
By 1 July 2021 super trustees of large APRA funds will be required to comply with a new duty to act in the best financial interests of members. Trustees must demonstrate that there was a reasonable basis to support their actions being consistent with members’ best financial interests.
This will affect those large APRA funds rather than SMSFs, to ensure they are spending in the best interests of the members.
In addition to previous COVID-19 relief, there are also further economic payments for pensioners
The Government will provide two separate $250 economic support payments, to be made from November 2020 and early 2021 to eligible welfare recipients and health care card holders.
If you’re in receipt of or hold one of the following, you will be entitled to these payments:
- Age Pension
- Disability Support Pension
- Carer Payment
- Family Tax Benefit, including Double Orphan Pension (not in receipt of a primary income support payment)
- Carer Allowance (not in receipt of a primary income support payment)
- Pensioner Concession Card (PCC) holders (not in receipt of a primary income support payment)
- Commonwealth Seniors Health Card holders
- Eligible Veterans’ Affairs payment recipients and concession card holders.
What didn’t change?
I also feel that it’s important to note what didn’t change for superannuation this year:
- Contribution caps, and the thresholds for contribution caps have not changed.
- For example, the general annual concessional contribution cap remains at $25k, however if you have less than $500k threshold at 30 June of the previous year, you still have the ability to carry forward unused concessional contributions from the previous 5 years starting 1 July 2018.
- For non-concessional contributions, the general cap is still $100k per person per year, unless using the 3 year bring forward, or if you have exceeded the $1.6m total super balance threshold.
- There are also no proposed changes to the super guarantee rates, which remain at 9.5%, increasing to 10% from 1 July 2021 and then 0.5% a year thereafter, to 12%.
- Early release of super on COVID-10 compassionate grounds was previously extended from 24 September to 31 December 2020, but no further extensions were announced in the Budget.
- Annual minimum pension requirements are still halved for the 2021 financial year, but no announcements were made to extend that any further.
- Finally, despite the large reduction in member balances due to COVID-19 there was no change to the $1.6m transfer balance cap. In the same way that market value increases do not affect the cap, the same goes for decreases in market value.
