Tax & Super Australia (TSA) says the Federal Budget’s super changes will be welcomed by working Australians who previously had limited access to compulsory employer superannuation contributions, and those older Australians keen to boost their balances in the lead up to retirement.
A key change is the removal of the $450 monthly income threshold for an employer to pay the superannuation guarantee (SG), said TSA’s tax counsel John Jeffreys. “This means people on low incomes will still receive some superannuation contributions for their work. It will benefit younger people and women, who are more likely to be in part-time, casual or irregular work.”
However, Mr Jeffreys said some employers may find the administrative requirement difficult in those cases where workers earned very small amounts. “The change seems to imply that super contributions must be paid for every $1 of employment income. This is good in that it will bring a number of people into the superannuation net. However, many employers will find the extra administrative burden too much. There may be some consideration down the track for another low-level threshold, say $50, so employers are not engaged in very small-scale super contributions.”
For older Australians, Mr Jeffreys said lowering the minimum age from 65 to 60 for the one-off $300,000 (per person) downsizer contribution will benefit people wanting to sell their family home earlier. Further, the abolition of the work test for those aged 67 to 74 will make it easier for older retirees to add to their super and make the most of tax-effective strategies.
“Australians are living longer. Many people approaching retirement are worried they won’t have enough super to see out their lifetime. These changes may give them more peace of mind.”
Meanwhile, the legislated SG increase — to 10% from 1 July 2021, then by 0.5% per year until it reaches 12% in 2025 — will occur as planned, despite concerns that the government would renege on this. “Sticking with this increase will likely save the government from a negative advertising campaign led by the industry super funds and unions leading up to an election.”
For SMSFs, Mr Jeffreys said changes that allow trustees living overseas to maintain control of their funds for five years (up from two years) and the abolition of active member requirements should be commended. “This is particularly so given the impact of COVID-19 on movement. And consequences for failing the central management and control test were too harsh for funds that always were, essentially, managed and controlled in Australia.”
For further comment, please contact TSA tax counsel John Jeffreys:
Mobile: 0416 250 461
Tax & Super Australia (TSA) is a not-for-profit organisation that provides practical tax, super and accounting information for more than 4,000 members and a tax community of more than 15,000.