Long time WIRE contributor and SMSF expert Tony Negline returns with a quick update and links to some indepth court cases.
There has been a lot happening in the superannuation space. This is a quick update on a range of issues you might need to know about:
- Government legislative program
The government has a long legislative program as we head towards Christmas and an election sometime in the first half of 2018. Some of these measures are unpopular amongst some constituents and it’s unclear if the government has sufficient support in the senate to pass them. It’s highly likely that some, or all, of these measures will be need to be considered by whichever political party forms government next year.
Increasing the maximum number of Self Managed Super Fund Members – the plan is to allow an increase from four to six members.There has been no statements about this policy since it was first announced in May
Work test for recent retirees – this policy was announced in this year’s budget; it would allow retirees aged at least 65 who have retired with only modest amounts in superannuation (less than $300,000) to contribute money to super in the first financial year they are not employed.We have seen draft legislation and regulation putting this in place but is not formally in place
Three yearly audit for SMSFs – this is also a Federal budget change and is controversial.The Federal Treasury released a discussion paper proposing a number of options as to how this policy might work and asked for feedback.Assuming the government wish to proceed, the next step would probably be the release of draft legislative changes followed by further consultation and then introduction into parliament.It would be helpful if the government gave us an indication as to how committed they are to this policy
Downsizer contribution rules – this is now allowed for those aged 65 and have recently sold their old home.There are a range of rules that need to be considered before you can use this rule.
See ato.gov.au/downsizing and here’s the form
Protecting smaller super balances – there are a number of strands here many of which come out of the Productivity Commission review into superannuation (see below); the policy is currently before the senate and it looks unlikely it will progress before the election
Ensuring greater Super Guarantee compliance including an employer amnesty for non-payment – the government’s policies which include some greater ATO collection powers are also before the senate and it does not seem likely these will progress before the election.
ALP franking credit policy
Obviously this policy remains unpopular among many investors. Based on its current design it primarily discriminates against those who have modest wealth – that is between about $800,000 and $10m for couples and between $500,000 and $5m for singles who have chosen to own investments personally or through a SMSF. Those with less or more than these amounts either escape or can plan around the policy.
- Royal Commission
The interim report did not deal specifically with any matters involving superannuation. These will be addressed in its final report which must be delivered to the Governor General by 1 February 2019.
We all await with interest to see what recommendations the Royal Commissioner makes in the final report and whatportions of these the government of the day seeks to implement. What changes will be made to regulator structure and operation? We also look forward to seeing which, if any, individuals and entities are hauled before the courts.
Federal Treasury has reportedly set up an area charged with working out how to implement likely regulatory changes the Royal Commission recommends.
- Superannuation Death Benefits
This remains an extremely grey area and in the last two weeks there have been some further court cases involving super fund death benefits. You can read my brief analysis here.
The government has recently announced a small change to tax policy to remove an anomaly that applied additional tax when moving death benefits between superannuation funds.
- Productivity Commission review into superannuation industry
This review does not have the same profile as the Royal Commission but will also likely lead to a range of changes in the super regulatory structure
The Commission’s draft report contained a large number of policy suggestions (a good summary is this link – roadmap).
Some of the Commission’s suggestions were far reaching especially in the area of default funds used for compulsory employer super contributions.
The Commission’s final report is due to be handed down just in time for Christmas and then the government will consider how it might implement the raft of final recommendations after consulting with interested parties.