A superannuation friendly budget is some of the good news to come out of the 2018-19 Federal Budget, with proposed changes set to reduce fees and charges.
Key changes include:
Life insurance cover in super to be opt-in
The Government will legislate that life insurance cover in superannuation will be opt-in for those individuals under 25 years of age or with account balances under $6000 to ensure that unnecessary fees do not erode smaller balances. Life insurance cover will also cease where no contributions have been made for a period of 13 months.
Exit fees, low account balances and inactive accounts
Exit fees will be banned for all superannuation accounts and for accounts with a balance of less than $6,000, a 3 per cent annual cap will apply to account fees.
Inactive super accounts with a balance of less than $6,000 will be transferred to the Australian Taxation Office (ATO), who will proactively work to reunite these accounts.
Three‑yearly audit cycle for some Self‑Managed Superannuation Funds (SMSFs)
The Government will change the annual SMSF audit requirement to a three yearly requirement for SMSFs with a history of good record keeping and compliance. The measure will start on 1 July 2019 for SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged the fund’s annual returns in a timely manner.
Expanding the SMSF member limit from four to six
As already announced, the Federal Government confirmed its decision to expand the number of members allowed in an SMSF from four to six. Expanding the definition of an SMSF to a fund with a maximum of six members will provide greater flexibility in how funds can be structured.
Work test exemption
The Government will provide more time for Australians aged 65 to 74 to boost their retirement savings, by introducing an exemption from the superannuation work test.
This exemption will apply where an individual’s total superannuation balance is below $300,000 and will permit voluntary superannuation contributions in the first year that they do not meet the work test requirements.
Status of changes
The information set out above is based on the data and budget information announced by the Commonwealth of Australia concerning the proposed 2018-19 Commonwealth Budget. Please note that although the changes outlined above have been proposed by the Government, the proposed legislative changes that are necessary to implement the proposed Budget are not yet finalised and may be subject to change as the relevant legislation implementing the changes proposed by the Budget passes through parliament. The above summary is intended as general information only and is not intended to constitute taxation or financial/superannuation planning advice. The application of many laws, including taxation laws, are dependent upon an individual’s personal circumstances. You should, therefore, not make any investment or other financial decisions in reliance upon the information set out in this correspondence and should seek professional advice on the financial, legal and taxation implications before making any such decisions.