The federal budget has pulled together a number of key changes for the superannuation industry in the aftermath of the royal commission, with tax breaks for fund mergers being made permanent, more support for regulation and around 55,000 older consumers to reap benefits.
The government has extended permanent tax relief to merging funds, with Industry Super Australia saying there are likely to be significant mergers coming up in the years ahead.
The CGT relief on super fund mergers and rollovers had been installed in 2008, allowing funds to move capital and revenue losses to a new merged fund, while deferring taxation on gains and losses from revenue and capital assets.
The budget has also introduced additional funding for ASIC and APRA of $600 million as well as money for a new, independent oversight authority to watch over the regulators, following on from the royal commission.
The Australian Industry of Superannuation Trustees (AIST), however, has expressed concern at the budget papers, stating industry would contribute to the additional funding for regulation through the ASIC industry funding model and increases in APRA levies.
“Profit-to-member super funds were thoroughly examined by the Hayne royal commission and unlike the banks, received a relatively clean bill of health,” Eva Scheerlinck, chief executive, AIST said.
“Their members should not be forced to pay for ASIC and APRA to investigate misconduct by banks and bank-owned superannuation funds.”
The 2019 budget gave a number of key changes for around 55,000 older consumers, which many organisations, including AMP, the Association of Superannuation Funds of Australia (ASFA) and KPMG have backed.
The AIST, however, has called the changes ‘modest’, saying they will not have enough impact for the majority of Australians.
Australians aged 65 and 66 will be able to make voluntary superannuation contributions without meeting the current work test, which requires individuals to work a minimum of 40 hours over a 30-day period from mid-2020.
It will work to align the work test with the eligibility to the age pension at 67.
The same cohort will also now be allowed to make lump sum contributions of three years’ worth of non-concessional contributions in the space of one year, which are currently capped at $100,000 a year.
The government has said it is also looking to increase the age limit for spousal contributions from 69 to 74.
Currently, people aged over 70 can’t receive contributions made by someone else on their behalf.
“The vast majority of members of profit-to-member superannuation funds will not benefit from these changes,” Ms Scheerlinck said.
“Most ordinary working Australians cannot afford to make extra contributions and can only dream of having the money to pour an extra $300,000 into their super fund in a single year.”
Ms Scheerlinck also noted that analysis by Rice Warner (for Women in Super) had indicated that less than one in four older workers made voluntary contributions and, even then, the average contribution was around $7,000.
To Industry Super Australia, not enough has been done to address the gender gap in superannuation, where women may end up retiring with around half the amount saved up compared with their counterparts.
“Sadly, the budget again misses an opportunity to take action on the millions of Australians missing out on super entitlements – particularly women and younger workers,” Matthew Linden, deputy chief super, Industry Super said.
“Women on average receive 40 per cent less super than men, and a third of Australian workers are being robbed of around $2,000 a year by employers refusing to pay super.
“The government could have made these issues a priority by paying super on parental leave, and abolishing the $450 per month super threshold.”
Mr Linden added although the budget includes additional funding to the ATO to recover unpaid super, there is no commitment to align super with wage payments.
Damian Ryan, KPMG Superannuation partner, said the technical amendments to the government’s ‘Protecting your Super Package’, introduced will benefit women.
There will now be a delay in the start of new opt-in arrangements for insurance within superannuation from 1 July to 1 October, allowing funds more time to engage with fund members who are affected.
The bill proposes to prohibit trustees from offering insurance on a default opt-in basis for new members under the age of 25 who open an account after the new date of 1 October and members with balances less than $6,000.
The package has also extended the period for which an account doesn’t receive any contributions to be considered to be inactive to 16 months.
“This provides greater flexibility for members, particularly women, who take extended breaks from the workforce,” Mr Ryan said.
The ATO will be receiving increased funding to crack down on payment of superannuation liabilities by larger businesses and high wealth individuals.
ASFA CEO Dr Martin Fahy said that changes made to superannuation tax settings in the government’s 2016 budget in particular, have made the superannuation system sustainable and equitable.
The body supports the government’s intention to increase the Superannuation Guarantee (SG) to 12 per cent, which currently mandates employers make super contributions at a minimum of 9.5 per cent of an employee’s earnings.
“The government has today taken the opportunity to reaffirm their commitment to retirees by leaving the system alone,” Dr Fahy said.
“Lifting the SG to 12 per cent is essential to ensure more Australians can enjoy a comfortable and dignified retirement.”
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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