No significant reform to super 4 min read
The 2021-22 Federal Budget delivers a spending bonanza in a possible election year with a focus on aged care, health, women and rebuilding the post-pandemic economy.
In contrast, super fund trustees will likely breathe a sigh of relief that there are no new significant reforms to the superannuation system on the Government's agenda.
In particular, while they are no doubt significant changes for impacted members, the key superannuation-related measures announced in the 2021-22 Federal Budget were limited to:
- removing the $450 per month threshold for superannuation guarantee (SG) eligibility;
- increasing the maximum releasable amount under the First Home Super Saver Scheme to $50,000 (from $30,000);
- reducing the eligibility age for downsizer contributions to 60 years of age (from 65);
- repealing the work test for voluntary superannuation contributions; and
- increased funding for APRA to supervise and enforce the transparency and accountability measures as part of the 'Your Future, Your Super' reforms.
Most conspicuously absent, despite the long-running conjecture about a possible abandonment (or curtailment) of the planned increase in the SG rate, was any clear statement from the Government on the topic. This means the minimum SG rate will increase to 10% from 1 July 2021 as currently legislated.
Overall, we think the absence of new significant reforms should be welcome news for trustees as it will allow them to focus on the extensive reform agenda already in the pipeline, including the 'Your Future, Your Super' reforms, the Financial Accountability Regime (if and when it arrives) and a range of others.
Below is an overview of the key superannuation-related proposals. For other reforms relevant to the financial services industry, refer to our latest insight on the FFSP regime and budget changes.
Key superannuation proposals
Removing the $450 per month superannuation guarantee thresholdThe Government will remove the current $450 per month minimum income threshold under which employees do not have to be paid superannuation guarantee contributions. Expected timeframe: 1 July 2022. |
First Home Super Saver Scheme (FHSSS) – increase to $50,000 and other technical changesThe Government will increase the maximum releasable amount of voluntary concessional and non-concessional contributions under the FHSSS from $30,000 to $50,000. The Government will also make technical changes to the legislation underpinning the FHSSS to assist applicants who make errors on their application. Expected timeframe: 1 July 2022. |
Reducing the eligibility age for downsizer contributionsThe Government will reduce the eligibility age to make downsizer contributions into superannuation funds from 65 to 60 years of age. The downsizer contribution allows individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. Expected timeframe: 1 July 2022. |
Repealing the work test for voluntary superannuation contributionsThe Government will implement changes to allow individuals aged 67 to 74 years (inclusive) to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contributions caps. However, individuals will still need to meet the work test to make personal deductible contributions. Expected timeframe: 1 July 2022. |
Legacy retirement product conversionsThe Government will implement changes to allow (but not require) individuals to exit a specified range of legacy retirement products, together with any associated reserves, for a two-year period. The measure will include market-linked, life-expectancy and lifetime products, but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme. The Government has announced that social security and taxation treatment will not be grandfathered for any new products commenced with commuted funds and the commuted reserves will be taxed as an assessable contribution. Expected timeframe: None specified. |
Increased funding for APRA and Super Consumers AustraliaThe Government has announced additional funding for APRA to supervise and enforce increased transparency and accountability measures as part of the 'Your Future, Your Super' reforms and for Super Consumers Australia. The funding will partially be met through an increase in levies on regulated financial institutions. Expected timeframe: None specified. |
Improving the visibility of superannuation assets in family law proceedingsThe Government is building an electronic information sharing mechanism between the ATO and the Family Law Courts to allow superannuation assets to be readily identified during family law proceedings in respect of superannuation splitting outcomes. This measure was announced as part of the 2018 Women's Economic Security Statement. |
No changes to minimum superannuation guarantee rateThe Government has not announced any measures in relation to the superannuation guarantee rate. This means that, subject to any subsequent change of heart from the Government, the minimum SG rate will increase from 9.5% to 12% over the next five years. From 1 July 2021, the minimum SG rate will increase to 10%. |
Early release of superannuation for victims of family and domestic violenceThe Government will not proceed with a measure to extend early release of superannuation to victims of family and domestic violence. |