What is the proposed measure?
The current superannuation work test will be removed for people aged 65 and 66 from 1 July 2020. This will enable an estimated 55,000 individuals to make concessional and non-concessional voluntary superannuation contributions even if they are not working. Under current rules, they can only make voluntary contributions if they meet the work test, which requires that they work a minimum of 40 hours over a 30-day period.
Who will it affect?
Individuals aged 65 and 66
When will it apply? From 2020-21 Comment:
By removing the work test, clients in this age bracket who are no longer working, only working a few hours per week, or only undertaking volunteer work will, should this proposal be implemented, be able to contribute to superannuation and enjoy the concessional tax treatment that it provides.
Access to the bring-forward cap will be extended from taxpayers aged less than 65 years of age to those aged 65 and 66. This will enable these taxpayers to make up to three years’ worth of non-concessional contributions, capped at $100,000 a year, to superannuation in a single year.
Who will it affect? Individuals aged 65 and 66.
This will give older clients greater flexibility to save for retirement. Clients in this age bracket will be able to contribute large lump sums that they have on hand into superannuation more quickly; bringing forward the accompanying tax concessions – rather than $100, 000 per year under the current rules that apply.
The age limit for spouse superannuation contributions will be increased from 69 to 75 years.
Individuals aged between 70 to 74.
When will it apply?
From 2020-21
Comment:
This provides clients with a greater ability to contribute on behalf of their spouse. Advisers should note that making spouse contributions is particularly useful where for instance: • the contributing spouse has already reached their own $1.6 million total superannuation balance restriction • where the recipient spouse is significantly older, as they can access a tax-free superannuation income stream whereas the younger spouse may not have yet met a condition of release, or • the contributing spouse is eligible to claim a spouse tax offset of up to $540 as their spouse is a low-income earner.
Allow superannuation funds that have both an accumulation and retirement interests during an income year to choose their preferred method of calculating exempt current pension income (ECPI). There is also a proposal to remove a redundant requirement for superannuation funds that are 100% in pension phase for all of the income year to acquire an actuarial certificate when calculating ECPI using the proportionate method.
Individuals and their SMSFs who are in superannuation pension mode
From 1 July 2020
The ability to choose between the segregated method or proportionate method to work out ECPI will simplify superannuation reporting for practitioners who have clients with SMSFs. The removing the requirement to obtain an actuarial certificate should reduce SMSF costs.
The current tax relief for merging superannuation funds that is due to expire on 1 July 2020 will be made permanent from that time. Therefore, superannuation funds will be able to continue to transfer revenue and capital losses to a new merged fund, and to defer taxation consequences on gains and losses from revenue and capital assets.
Clients whose superannuation funds merge.
This will continue to encourage superannuation funds that are contemplating merging (including SMSFs). Advisers can inform clients that there will be no adverse consequences of mergers moving forward. Merging can reduce costs manage risks and increase scale, leading to improved retirement outcomes for members.
The government confirmed that it will delay the start date to 1 October 2019 for ensuring insurance within superannuation is only offered on an opt-in basis in respect of members with accounts with balances of less than $6,000 and new accounts belonging to members under age 25.
The above categories of superannuation fund members.
The original start date of 1 July 2019 is delayed to 1 October 2019
The changes seek to prevent the erosion of super savings through inappropriate insurance premiums and duplicate cover. Advisors should inform affected clients that they can still obtain insurance cover within their superannuation by electing to do so (ie. opting-in).
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