The Government has released details of the Federal Budget for 2018 and tax relief was the key takeaway. In addition, there were a range of amendments to super which are designed to protect low balance super accounts and encourage retirement savings.
Making default insurance opt-in
Default insurance will move to an opt-in basis for members:
- with a balance less than $6,000; or
- who are under 25; or
- whose accounts have not received a contribution in 13 months and are inactive.
These members will have a period of 14 months (starting from 1 July 2019) to decide whether they will opt-in to their existing default cover or allow it to cancel automatically.
From 1 July 2019 there will be a cap on fees (including administration and investment fees) for accounts with balances of less than $6,000. These will be capped at 3% annually. In addition to this, exit fees will be removed so members will be able to transfer their superannuation freely without this additional cost.
Small and inactive accounts
Superannuation funds will be required to transfer all inactive superannuation accounts with a balance of less than $6,000 to the ATO.
Work test exemption for recent retirees
The government will introduce an exemption from the work test for voluntary contributions to superannuation, for people aged 65-74 with superannuation balances below $300,000, in the first year that they do not meet the work test requirements.
Currently, the work test restricts the ability to make voluntary superannuation contributions for those aged 65-74 to individuals who self-report as working a minimum of 40 hours in any 30 day period in the financial year.
The work test exemption will apply from 1 July 2019 and is intended to give recent retirees additional flexibility to get their financial affairs in order in the transition to retirement.
Pension Work Bonus
From 1 July 2019 the earning cap for the Pension Work Bonus will increase from $250 to $300 per fortnight to allow pensioners to earn up to a maximum of $7,800 without an impact on their pension (an additional $1,300 per year). This measure will also include self-employed retirees.
QIEC Super is here to help
For further details of the above announcements and/or other measures announced but not listed here, go to Budget 2018-19. Please note that these are proposed changes only and have not yet been passed by Parliament. QIEC Super will keep you informed if and when these proposed changes are legislated.
If you have any questions or would like to discuss how the above measures impact you, please contact QIEC Super on 1300 360 507 or firstname.lastname@example.org.