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The focus of the 2019/2020 Federal Budget was on significant tax cuts for low and middle income earners. The Government also announced a one-off payment to pensioners to help cover the cost of energy bills, and modest changes to superannuation. These include:
The Government did not make any changes to the legislated timeframes for increasing Superannuation Guarantee contributions from the current rate of 9.5% to 12%.
In our media release, AIST noted the super changes were modest and would not help most Australians build their retirement savings.
For age pensioners, the Government announced a one-off Energy Assistance Payment of $75 for singles and $125 for couples. The payment will be made this financial year at a cost of $284 million.
The Government also announced modest changes to superannuation which will benefit retirees and older members preparing for retirement. There are three changes which will benefit older Australians who can afford to make additional voluntary superannuation contributions - for example people who receive a large inheritance later in life.
First, people aged 65 and 66 will be able to make voluntary concessional and non-concessional super contributions, without meeting the work test. This test requires that the member work at least 40 hours over a 30 day period.
Secondly, this group will be able to make voluntary non-concessional contributions of up to $300,000 in a single year.
Thirdly, members will be able to make voluntary contributions for a spouse up to age 74, up from the current cut-off of 69 years.
The changes will commence on 1 July 2020.
This Federal Budget is very different to last year’s ambitious budget, in which the Government announced the ‘Protecting Your Super’ package that ushered in major changes to superannuation fees and insurance and introduced the ATO-led system of autoconsolidation of multiple accounts.
In response to the Financial Services Royal Commission, the Government has announced additional funding for the Australian Financial Complaints Authority (AFCA), to establish an historical redress scheme to consider financial complaints dating back to 1 January 2008.
The Government will also establish an independent inquiry in three years that will assess whether industry has implemented the recommendations of the Royal Commission.
The Government also announced more funding to regulators responsible for dealing with misconduct in superannuation. ASIC will receive $400 million additional funding over 4 years, while APRA will receive $150 million extra funding over 4 years. Most of this additional funding was announced earlier this year.
The Government has also set aside $35 million for a new corporate criminal jurisdiction in the Federal Court.
Industry will contribute to this funding via the ASIC Industry Funding model and APRA levies.
The Federal Budget also confirmed the funding arrangements for the previously announced Treasury Financial Services implementation Taskforce and APRA Capability Review.
The Government will explore whether to establish a Superannuation Consumer Advocate. The Advocate would provide input on behalf of consumers in policy discussions and provide information to educate and assist consumers to navigate the superannuation system.
The Minister for Financial Services has moved quickly on this measure, announcing last night that he has asked Treasury to start an expression of interest process and recommend a provider, or providers. Treasury will also advise the Minister on the potential scope of the advocate’s activities, and to formulate accountability, governance and funding arrangements.
The Government will provide additional funding to the Superannuation Complaints Tribunal to allow it to finalise its caseload and conduct closedown activities.
The additional funding will allow the Tribunal to resolve all outstanding complaints by 31 December 2020, when the Tribunal will cease operations.
This recognises the additional caseload received by the Tribunal, as a result of the delayed commencement of AFCA, which opened its doors in November 2018.
The cost of this measure will be recouped via an increase in APRA levies.
The Government will make permanent the current transitional tax relief for merging superannuation funds. The relief was introduced in 2008 and has been repeatedly extended. The relief was due to expire on 1 July 2020. It is designed to ensure that member balances are not impacted when funds merge.
The Government announced additional funding of $9 million over four years for the Fair work Commission to establish a dedicated unit to tackle employers who use sham contracting arrangements. Sham contracting is used by employers to avoid paying workers entitlements, including the employer’s superannuation obligations.
The Government will provide extra funding to the ATO to expand the application of the SuperStream rollover standard to include electronic release authorities to funds from 31 March 2021.
The start date for the inclusion of SMSF rollovers in SuperStream will also be delayed until 31 March 2021.
The Budget Papers also reflect the Senate amendments to the Protecting Your Super package made in February 2019. These amendments:
The changes were passed into law last month.
Finally, the Government has announced that it will delay the start date for the Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019.
This Bill would make insurance in superannuation opt in for members with account balances of less than $6,000 and new accounts for members under the age of 25 years.
The changes were originally to commence on 1 July 2019. The start date has been delayed until 1 October 2019. This Bill is before the House of Representatives, and is not expected to pass before the forthcoming federal election.
03 April 2019