Last night (8 May 2018) the Federal Government released its 2018-19 Budget.
This year’s Budget included a range of changes to superannuation, focused on reform packages which protect members from having their super balances eroded, while making it easier to locate inactive accounts.
There were also a number of announcements focused on helping retirees and pensioners boost their income and improve their lifestyle in retirement through a new retirement income framework.
Key Budget measures relating to superannuation
- Administrative and investment fees will be capped at 3% for accounts with balances below $6,000 and superannuation funds will no longer be able to charge exit fees (Mine Super does not charge exit fees).
- Making insurance opt-in for new members under 25; for accounts with less than $6,000; and for member accounts that have been inactive for 13 months or more.
- The Australian Taxation Office will now actively seek to consolidate inactive super accounts with balances below $6,000.
- High income earners impacted by the concessional contribution cap of $25,000 will now be able to nominate that income from certain employers is no longer subject to the Super Guarantee.
- People aged 65 to 74 with a total super balance less than $300,000 will have a limited, one-year exemption from the work test for voluntary super contributions.
- Introduction of a new retirement income framework that will require superannuation funds to offer their members a lifetime income product. These proposals are subject to further consultation with superannuation funds.
Measures to boost retirees’ incomes
- Under the Pension Work Bonus scheme, pensioners will now be able to earn $300 per fortnight (up from $250 per fortnight), without impacting their pension. It will also be expanded to self-employed people who will be able to earn up to $7,800 a year.
- The Pension Loans Scheme extends eligibility to all Australians over pension age to borrow up to 150% of the age pension rate. This Pension Loans Scheme is a reverse-mortgage style scheme that enables retirees to release equity in their home to boost their income.
Importantly, the Budget didn’t contain any major changes to the way super is taxed or to the contributions caps. The timetable to increase the compulsory employer super contribution rate from 9.5% to 12% was left unchanged. The next increase from 9.5% to 10% is set to take place in 2021.
Please note, many of these changes will need to pass parliament and are not expected to take effect until 1 July 2019.
For more information about the full range of budget announcements, see the Budget 2018-19 website.
As always, if you have any questions please call us on 13 64 63, email email@example.com or contact your financial adviser. We can also put you in touch with Mine Super Financial Advice to discuss your personal circumstances.