1 Important announcement from Statewide Super
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Federal Budget 2018-19

A message from Statewide Super CEO, Richard Nunn

On 8 May 2018, Federal Treasurer, Scott Morrison, released his third Federal Budget.

As an industry super fund, we naturally support measures that deliver a fair and more sustainable superannuation system for our members. This year, a range of diverse recommendations to superannuation were tabled, with reform packages designed to protect super from erosion and introduce a new retirement income framework.

We are pleased there were no changes to the legislated increase of the Superannuation Guarantee (from 9.5% to 10% in 2021). Further, there were no major changes to the taxation of super or the concessional and non-concessional contribution caps.

The Australian Institute of Superannuation Trustees has provided the following summary of the announcements impacting superannuation. Please note that these budget announcements are subject to legislation being passed.

Federal Budget 2018-19 – Superannuation measures

Budget Snapshot

  • Auto-consolidation of multiple accounts

    The Government announced proposals to tackle multiple superannuation accounts. Under the proposals, all super accounts that have not received a contribution for 13 months, with balances below $6,000, will be classified as inactive and transferred to the ATO.

    The ATO will be given powers to use data matching to automatically consolidate these accounts with members’ active accounts.

    The Government expects the new system will reunite $6 billion of superannuation with 3 million members’ active accounts in 2019-20.

    If passed, these changes will take effect from 1 July 2019.

  • Fees

    The Government has proposed measures to reduce the impact of superannuation fees on member balances. The proposed measures are:

      • A 3% cap on administration and investment fees on accounts with balances less than $6,000.
      •  Abolishing all superannuation fund exit fees.

    If passed, these changes will take effect from 1 July 2019.

  • Insurance in superannuation

    The Government will consult on proposals to abolish default insurance cover within superannuation for young people under 25, those with balances of less than $6,000 and inactive accounts that have not received a contribution for 13 months.

    These proposals would protect the superannuation balances of these members from being eroded by insurance premiums on policies they do not need or are not aware of. It will also reduce the incidence of duplicated cover so that individuals are not paying for multiple insurance policies which they may not be able to claim on.

    If passed, these changes will take effect from 1 July 2019 and affected members will have a period of 14 months to decide whether they will opt-in to their existing cover or allow it to switch off.

  • Pensions home equity scheme

    The Pension Loans Scheme is a reverse-mortgage style scheme that enables retirees to release equity in their home in the form of an income stream, which is administered by Centrelink. The Scheme is currently only open to retirees who are eligible for a part Age Pension and is not widely used. The Government has proposed to extend the Scheme to all retirees, including full rate Age Pensioners and self-funded retirees.

    This will enable single retirees who own their own home to boost their income by up to $11,799 and couples to boost their retirement income by up to $17,800 without impacting their eligibility for the Age Pension or other benefits.

  • Pension Work Bonus

    The Pension Work Bonus allows pensioners to earn up to $250 each fortnight without reducing their Age Pension. It will be expanded to allow pensioners to earn an extra $50 a fortnight ($1,300 a year) without reducing their pension payments.

    The Pension Work Bonus will also be expanded to self-employed people who will be able to earn up to $7,800 a year.

    The Government expects 88,000 people to take up the option to work more as a result of these changes.

  • Allowing retirees to make voluntary contributions in the first year of retirement

    Retirees aged between 65 and 74 with a superannuation balance below $300,000 will be allowed to make voluntary super contributions for the first year where they no longer meet the work test requirements.

    Currently, the work test restricts the ability to make voluntary superannuation contributions for those aged 65-74 to individuals who self-report as working a minimum of 40 hours in any 30 day period in the financial year.

    The work test exemption will apply from 1 July 2019 and is intended to give recent retirees additional flexibility to get their financial affairs in order in the transition to retirement.

    Existing contribution cap rules will continue to apply to contributions made under the work test exemption.

  • Developing framework for Comprehensive Income Retirement Products

    The Government has proposed introducing a retirement income covenant requiring superannuation trustees to formulate a retirement strategy. It will require trustees to offer Comprehensive Income Products for Retirement.

    The Government will release a position paper outlining its proposed approach to the covenant shortly. Providers of retirement income products will also be required to report simplified, standardized metrics in product disclosure to assist consumer decision making.

    From 1 July 2019 new Age Pension means testing rules will be introduced for pooled lifetime income streams. The rules will assess a fixed 60 per cent of all pooled lifetime product payments as income, and 60 per cent of the purchase price of the product as assets until 84, or a minimum of 5 years, and then 30 per cent for the rest of the person’s life.

 Should you have any questions about these announcements and how they may affect your super, we encourage you to speak to one of our financial planners. To make an appointment please call 1300 65 18 65.