A very benign May budget was handed down by the government, compared to last years, with very few changes to super. We have highlighted the significant changes that will impact SMSF trustees and members in this article.
The government has proposed that from 1 July 2019 the ATO will assist with lost super accounts with less than $6,000 in value which will be forwarded to the ATO by retail and industry funds. The ATO is further proposing to consolidate lost super funds to this value with the already active funds in the market using data matching for active member accounts. This will result in an increase of around $6 billion in super being matched with 3 million active super accounts.
Members with low super balances below the value of $300,000
Will be given a one-year exemption from the work test for voluntary contributions to super for people aged 65-74. This will enable many older Australians the opportunity of contributing more funds to super to maximise their retirement.
John retires on the 1st of June 2020 with only $150,000 in super. He does not meet the work test. Under the new rules, he could put $45,000 at concessional rates (using the carry forward arrangements) and $100,000 in non-concessional contributions.
Examples provided in the budget work papers
SMSF’s will be allowed 6 members in a fund from 1 July 2018 which represents an increase of 2 people from the current maximum of 4 persons allowed in an SMSF to cater for larger families
Division 293 – High income earners
Those of you that earn over $263,157 with multiple employers will be able to nominate which contractors or employers are exempt from Superannuation Guarantee payments from 1 July 2018. This measure is intended to reduce the number of people who breach the $25,000 cap on concessional contributions and it further, allows these high-income earners the ability to negotiate a higher income without impacting their super contribution levels.
SMSF’s with a clean up to date tax history extending to
- Individual tax returns
- Company’s; Trusts,
Will be allowed to be audited every (3) three years instead of annually where the fund has a clean audit history
New Tax Rates and thresholds:
|Taxable income V super tax and savings|
|Taxable Income||Tax Rate*||Tax in super||Tax benefit|
|$0 to $20,542*||0%||0%**||NIL|
|$20,543 to $37,000||21%||0%**||21%|
|$37,001 to $87,000||34.50%||15%||19.50%|
|$87,001 to $180,000||39%||15%||24%|
|$180,001 to $250,000||47%||15%||32%|
|*include low income offset|
|** low income super offset|
NOTE: From I July 2024 the 39% tax bracket will be removed
Pension Loan Scheme
You may qualify if:
- You are of age pension age 60 -65 and are a qualified resident
- You own a home with a mortgage and you have available equity
- You receive less from the age pension due to failing the income or assets test, but not both.
You receive one of the following types of pensions
- Age Pension /Bereavement Allowance/Carer Payment / Disability Support Pension/ Widow B Pension / Wife Pension
Loan Interest rates are 5.25% and the payments are not taxable, and the amount of the loan will be determined based on what is required, equity in your property and a few other variables.
So,overall a very easy budget to digest and its certainly enhanced the attractiveness of SMSF’s.