This year’s Federal Budget was unexpected good news for anyone with a self-managed superannuation fund as there were no changes to the taxation of superannuation funds or contributions as many expected. The increase in the maximum number of members of SMSFs from four to six members; and a deferral of the start date for exempt current pension income methods to 1 July 2021 was confirmed in the 2020-21 Budget.
Reform Announcements to MySuper
The main reform announcements in the Budget were designed to reduce the number of duplicate employee accounts as a result in changes in employment and to provide information about underperforming funds. As part of these reforms the Australian Tax Office (ATO) would develop systems so that new employees are able to select superannuation products which would:
- Provide a table of simple super products (MySuper) through a ‘YourSuper’ portal.
- Rank MySuper funds by fees and investment returns.
- Establish links to MySuper websites to choose a suitable product.
- Help anyone to consolidate multiple superannuation fund accounts.
Anyone with existing superannuation will have their account linked when changing employment to avoid the creation of new multiple accounts. This would occur where an employee does not nominate a fund at the time of changing employment. The employer would make contributions to the employee’s existing fund which is made available via the ATO’s website. For anyone without a superannuation account, the employer would make the employee’s contributions to the employer’s nominated default superannuation fund.
As part of the reform package the Australian Prudential Regulation Authority (APRA) will benchmark the net investment of MySuper products and any funds underperforming over two consecutive annual tests will not be permitted to admit new members until the performance improves. From 1 July 2022, non-MySuper funds will be added to the performance benchmarking review lists.
Another component of the reform package is greater transparency and accountability of superannuation funds to ensure the actions of trustees are consistent with the maximisation of members’ retirement savings.
Other Super Announcements
There was no or little change in some of the previously announced superannuation measures. These included:
- no further mention of the proposed change to increase the age for non-concessional contribution (NCC) bring-forward purposes to 67 years of age. The bill to enact this previously announced measure is still currently before parliament.
- no change to the COVID-19 temporary early release of super measure. Eligible Australian and New Zealand citizens and permanent residents continue to be allowed just one withdrawal opportunity of up to $10,000 from 1 July 2020. The application must be made for release by 31 December 2020.
- confirmation of the deferred start date for a number of previously announced SMSF measures:
- Increasing the maximum number allowed members in an SMSF (or Small APRA funds) from four to six – start date deferred to the date of Royal Assent of the enabling legislation. This bill has been referred to the Senate Economics Legislation Committee, due to report on 4 November 2020.
- Changes to the calculation of exempt current pension income have also been deferred from 1 July 2020 to 1 July 2021, to apply for the 2021/22 financial year.
It will be interesting to see how these changes are implemented for new employees and anyone who finds themselves a member of an underperforming fund. One thing is for certain, self-managed funds have been at the end of the superannuation sector where members are considered engaged and interested. This includes the performance of their fund, a considered choice that provides a competitive advantage to other funds and provides transparency in investment selection.
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