Following speculation and policy proposals over the election period, on Thursday 17 of June, the House of Representatives and the Senate passed both the Treasury Laws Amendment (Self-Managed Superannuation Funds) Bill 2020 and the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020.
The passing of the two bills has seen the implementation of the following changes to Superannuation in Australia:
Self-Managed Super Funds Increased to Allow 6 Members
Many families choose to utilise a Self-Managed Super Fund as a vehicle for controlling their own superannuation savings and investment strategies. Because no two families are the same, the Government has said that by increasing the number of members in an SMSF from 4 to 6, families will be provided with greater investment flexibility, an increase in the choices they make, and lower fees (for families in a position to utilise them).
Prior to the increase, family units with more than 4 family members who wanted to utilise a Self-Managed Super Fund had to choose one of the following options:
- Create an additional SMSF (which would incur additional costs)
- Place their superannuation into one of the Retail or Industry Super Funds.
While it’s predicted that these changes will not lead to a significant increase in the amount of SMSFs that are being established, it will help large families to include all of their family members in their SMSF, and encourage families of more than 4, who had not previously utilised a SMSF, to consider establishing one.
Bring-Forward Extended to Ages 65-66
Prior to the passing of this new legislation, members under the age of 65 at any time in a financial year were able to effectively bring forward up to two years worth of non-concessional cap for that income year. This enabled them to contribute an amount (up to $300,000) without exceeding their non-concessional cap.
The new bring-forward measures now allow individuals aged between ages 65 and 66 to make up to 3 years of non-concessional superannuation contributions.
Updates to Spouse Contributions
The changes have increased the cut-off age for superannuation spouse contributions from 70 to 75. Under the current 2020/2021 tax rules, spouses wanting to make a contribution of up to $3,000 on behalf of their non-working or low-income-earning partner may be eligible to claim an 18% tax offset. While contributions exceeding $3,000 can be made, the spouse contribution tax offset is not applicable to amounts exceeding $3,000.
Removal of Excess Concessional Contributions from 1 July 2021
Currently, when an individual exceeds their Concessional Contributions Cap, they may also incur the Excess Concessional Contribution (ECC) Charge. The charge is made in addition to the extra tax paid when any excess contributions are included in assessable income.
This policy will be removed from 1 July 2021. The removal of the Excess Contribution Charge (ECC) in situations where an individual has exceeded their concessional contributions cap through no fault of their own (i.e. SG received on wages is above the CC cap).
Recontribution of COVID-19 Early Release Amounts
Australians were given the option to withdraw funds from their superannuation accounts in response to the COVID-19 pandemic. If an individual decides that they no longer need the funds and would like to recontribute the money to their superannuation account, the government has updated the rules so that recontributing this money will not count towards the NCC Caps.
Whilst the Government has passed these bills we still await for them to be given Royal Assent so that they become law.
Hopefully, the superannuation updates above are helpful. Note that the information provided above is general in nature and should not be taken as advice. We recommend you obtain any advice from one of our Melbourne-based licensed financial advisors. Get in touch for a free consultation today.