|First published: May 9|
Last year, the government introduced the biggest reforms to superannuation in a decade.
So, it’s not surprising that in this year’s Federal Budget, super has been largely sidestepped, leaving the $140 billion tax cut package in the spotlight.
There are some tweaks to the super system though – some helping young people (particularly those in part-time or casual work) and others aimed at improving retirement incomes.
Here’s our summary of the changes:
As a member-first fund, we work hard to keep our fees low. Other funds can have very high ongoing costs – which can quickly eat into account balances.
The Budget aims to put an end to that, with a 3% cap on fees for account balances below $6,000 (LGIAsuper’s fees are only a fraction of that).
This measure aims to help young people grow their super without being penalised by excessive fees and charges.
The Budget also takes aim at super funds penalising members by imposing exit fees (which currently cost tens of millions of dollars each year).
Exit fees can trap members in underperforming funds, and the government will move to ban them.
Both the fee cap and exit fee ban should start from 1 July 2019.
The cost of insurance premiums can have a significant impact on account balances and long-term retirement outcomes.
Most affected are young people and those with low account balances, and the Budget aims to ensure those groups aren’t paying for duplicate insurance or cover that isn’t needed.
From 1 July 2019, insurance in super for three groups will change from default cover (opt-out) to opt-in.:
The reforms are aligned to the Insurance in Superannuation Code of Practice, which LGIAsuper has already agreed to adopt.
The Australian Tax Office (ATO) will receive extra funding to crack down on individuals and employers who aren’t doing the right thing.
This includes targeting individuals who aren’t meeting their tax obligations and employers who don’t comply with the requirement to make Superannuation Guarantee contributions.
The ATO will also be chasing individuals who claim a tax deduction for personal super contributions, but don’t submit a ‘notice of intent’ to claim a deduction.
The Pension Loans Scheme (which allows Age Pensioners to generate an income using the equity in their home) will be given a revamp.
The existing scheme hasn’t been widely used, and the government hopes broadening the scope of the scheme will provide an alternative form of retirement income for some people.
There’s also some help for recent retirees. Those between the ages of 65 and 74 with less than $300,000 in super will be given a one-year exemption from the work test for voluntary super contributions.
And if you’re planning on working after Age Pension age, there’s more good news – the Pension Work Bonus will rise from $250 to $300 each fortnight, so pensioners can earn up to $7,800 each year without a pension reduction. The scheme will also be extended to self-employed pensioners.
All Budget proposals are subject to parliamentary approval. LGIAsuper will keep you informed through regular news articles.