Superannuation measures in the Federal Budget
Technical Services Manager, JB Were
Member of The Tax Institute’s Superannuation Technical Committee
Note: Views expressed by Kim Bailey were her own and not representative of JB Were.
Transcript, 4 April 2019: Post-Budget comments regarding Superannuation changes
KYM BAILEY: Thankfully the 2020 Federal Budget didn’t have superannuation front and centre as we’ve seen in previous years, and that’s probably a good thing. Practitioners are working through the raft of changes – they’re still dealing with a lot of the changes that we got in the 2016 Budget which was effective from 2017.
It’s important to note that some of the Budget measures that were previously announced have still not passed into legislation, and they will lapse when Parliament dissolves, possibly as quickly as this week.
Whether or not some of these measures that haven’t gone through, end up getting through – we can’t speculate at this stage.
The measures that I want to talk about today were positive, and they were welcome - but not particularly significant in the scheme of things.
The first one was the extension of the ability to contribute to super.
At the moment, it cuts at 65 unless you satisfy a work test. If this is passed the measure will mean that you can contribute potentially up to age 66 without having a work test nexus – which is great. Particularly if you retire and come and have a capital event sometime close to that retirement event. It might give you the scope to put a little bit more through to super.
And importantly the bring forward non-concessional contributions is included in that age extension.
So, where I see that working really well for early retiree clients would be around the downsizer contribution. So that was a measure that was introduced in our last Budget, and it’s been quite well received across the board.
That allows people to take $300,000 from the proceeds of the sale of a home and contribute to super, and it’s agnostic to other caps, so it’s quite a nice one, and particularly interesting was it was age agnostic.
So, if you look at the proposed measure to extend the contribution age eligibility and add it into the downsizer contribution, you could see that when you have that significant liquidity event of the sale of a home, post-retirement - you can see that you may be able to squeeze some extra into super, which would be great.
In addition to the extension of age eligibility for contributions, was an extension of the age of eligibility for spouse contribution. So, if passed that will be lifted to age 74. But unfortunately, the detail was scant. It’s a difficult measure to actually put into practice because the spouse actually has to satisfy a work test after age 65.
So, if all of those settings stay and we just get a higher age, I’m imagining it’s not really going to have too much of an impact unfortunately.
The measure that introduced low balance - and when we say low we mean $300,000 - those people are allowed to contribute to super in the year after they stop working, post 65.
Now that actually has been changed in our regulations, but the other part of that announcement which was the ability to bring forward non-concessional contributions, has not been passed into law.
So it may well lapse now when Parliament dissolves, and even if it didn’t, I think it might be somewhat redundant with this new measure.