Important superannuation changes pass both Houses of Parliament
Bills containing important superannuation measures which may impact you have passed both Houses of Parliament.
These measures have now also received Royal Assent, which is the final step required for a parliamentary bill to become law.
The three changes to superannuation are:
1. Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 which extends the three year non-concessional contribution bring forward rule to individuals under age 67. This measure is effective 1 July 2020.
Two important amendments to the Bill that you might be interested in are:
- Removal of the excess concessional contribution charge
- Ability to re-contribute COVID-19 early release amounts without impacting your non-concessional contribution cap
Removal of the excess concessional contribution charge
Starting 1 July 2021, the excess concessional contribution charge will be removed. The excess concessional contributions charge is an interest penalty that applies to the increased tax liability due to adding excess concessional contributions to assessable income.
Excess concessional contributions will still be automatically added to an individual’s personal assessable income and taxed at personal marginal tax rates. Individuals will also remain entitled to non-refundable tax offset equal to 15%.
If an individual made an early super withdrawal under the former COVID-19 condition of release, they may re-contribute these amounts without it counting towards their non-concessional contributions cap.
To be eligible, re-contributed amounts must be made between 1 July 2021 and 30 June 2030. The total amount of contributions covered under this exemption must not exceed the COVID-19 release amount. An individual will not be eligible to claim a personal tax deduction on amounts they elect to treat as COVID-19 re-contributions.
2. Treasury Laws Amendment (Your Future, Your Super) Bill 2021 which contains measures to limit the creation of multiple superannuation accounts as well as introduce MySuper performance reporting.
Single default fund
Employees who start a new job on or after 1 November 2021 will have employer super contributions directed to their existing ‘stapled fund’ (defined in the regulations) if one exists unless the new employee chooses another fund.
Employers will obtain information about the employee’s existing superannuation fund from the Australian Taxation Office if it is not provided by the employee. The purpose of this amendment is to reduce the instances that members accumulate multiple superannuation accounts each time they change jobs.
Addressing underperformance in superannuation
Another change implemented under this Bill is the requirement for the Australian Prudential Regulation Authority (APRA) to conduct an annual, objective performance test for MySuper products and other products be specified in regulations.
Funds that do not pass this test will be required to notify members in writing. If a fund has not passed the performance test for two consecutive years, it will be prohibited from accepting new members into that product.
In addition, the new legislation will facilitate the implementation of the YourSuper comparison tool that will be available on the ATO website, previously announced in the 2020/21 Federal Budget. The tool will be available from 1 July 2021. The website will be designed to make it easy for members to choose a superannuation product based on fees and performance information.
3. Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020 permits the maximum number of members allowed in a self-managed superannuation fund and small APRA fund to increase from four to six. This measure will commence from 1 July 2021.
You should note that some states including NSW only permit up to four individual trustees. Members who are impacted by state-based law limitations may wish to consider a corporate trustee if they wish to expand the SMSF to five or six members.
Please contact Carrick Aland on 07 4669 9800 if you would like more information so we can help you understand how these changes might impact you.
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The changes are subject to the passing of legislation and, accordingly, may not become law or may change. Please note that the information is based on our interpretation of the proposed changes as at the date of issue of this document. Accordingly, you must not do or refrain from doing anything in reliance on this information without obtaining suitable professional advice.