Pretty much no change at all!
The Government has proposed a number of structural changes designed to reduce fees and highlight to members that their fund is underperforming, and to provide details of alternative super funds that may better suit the individual’s needs. These changes are detailed here and are not expected to impact SMSFs.Join our newsletter
Other than that, the status quo remains, which means:
- There were no changes to contribution caps. Despite Pauline Hanson’s attempts at change, the concessional contributions cap for 2020/21 remains at $25,000. And the non-concessional contributions cap for 2020/21 remains at $100,000 for those with total super balances of less than $1.6m at 30 June 2020.
- There were no changes to the contribution work test rules. Members aged between 67 and 74 must meet a work test before contributions (other than superannuation guarantee contributions) can be accepted unless they meet the “work test exempt” contribution criteria.
- There were no changes to the myriad of total super balance “thresholds”. For example:
- $300,000 limit for qualifying to make a “work test exempt” contribution
- $500,000 limit for utilising concessional contributions cap amounts carried forward from 2018/19
- $1.4m, $1.5m and $1.6m thresholds for non-concessional contributions cap amounts under the “bring-forward rules”
- We are still waiting for Parliament to pass the change, allowing those turning 66 and 67 to trigger “bring forward mode”. Hopefully, this change will be passed when Parliament sits this week.
- The rate of superannuation guarantee will increase to 10% on 1 July 2021 (and then increase 0.5% each year until it reaches 12% from 1 July 2025). Interestingly, of the more than 100 advisers and accountants who we surveyed in the lead up to the Budget, more than 80% expected the Government to postpone this increase.
- There will be no extension to the Government’s COVID-19 early release of super scheme. It will cease on 31 December 2020 as planned.
- No extension was announced to the current halving of the pension draw down rates (for account-based pensions, transition to retirement income streams and market linked pensions). Unless further changes are made, full draw down rates will return from 1 July 2021.
- The transfer balance or pension cap remains at $1.6m with no concessions for those who have suffered losses in the value of their pension balance as a result of COVID-19.
- Disappointingly, there is no option for legacy pensioners (ie those drawing complying lifetime/life expectancy and market linked pensions) to convert to more flexible arrangements like account-based pensions.
- The current inflexible residency rules for super funds remain.
- There were no changes announced to the regulations for financial advisers in light of COVID-19 and the increased demand for advice.
Fortunately, we’ll be unravelling some of our current super system's complexities in our upcoming Super Intensive Day for professionals on 5 November 2020.
If you haven’t done so, REGISTER NOW as we will be presenting our latest thinking on all things SMSF.