The Federal Budget has brought stability to superannuation and enhanced confidence in the nation’s retirement funding system, according to the Association of Superannuation Funds of Australia (ASFA).
ASFA chief executive Martin Fahy argues that changes made to superannuation tax settings in the Government’s 2016 Budget in particular, have made the superannuation system sustainable and equitable.
“The Government has yesterday taken the opportunity to reaffirm their commitment to retirees by leaving the system alone,” he says.
Aside from tweaks to the work test and bring forward rules, the 2019-20 Federal Budget – handed down last night by Federal Treasurer Josh Frydenberg – did not tamper with rules on acceptance or taxation of contributions.
Specifically, these tweaks will help Australians nearing retirement to boost their superannuation savings.
For example, there will be greater flexibility in contribution rules for superannuation fund members aged 65 and over. From July 1 2020, Australians aged 65 and 66 will be able to make voluntary superannuation contributions, both concessional and non-concessional, without meeting the work test. Previously, people had to be gainfully employed at least 40 hours in a period of not more than 30 consecutive days in that financial year.
“We will also extend access to the bring-forward arrangements, which currently allow those aged less than 65 years to make three years’ worth of non-concessional contributions, which are capped at $100,000 a year, to their super in a single year,” Frydenberg added as he delivered the first budget surplus in 12 years.
“This will now be extended to those aged 65 and 66.”
The government will also increase the age limit for spouse contributions from 69 to 74 years.
Canberra is also making permanent the current tax relief in place for merging super funds that is due to expire on July 1, 2020. This will ensure member balances are not hit with the tax consequences of the merger.
“This is consistent with recommendations by the Productivity Commission final report and ASFA advocacy,” adds Fahy.
According to Financial Services Council chief, Sally Loane, the changes to extend access to the work test exemption, spouse contributions and bring-forward arrangements will provide workers nearing retirement greater flexibility to make additional super contributions if they are able.
“Australians are working for longer and many want the opportunity to continue saving for retirement while they do so” she says. “This is particularly important for those workers currently nearing retirement, who have not had the benefit of compulsory superannuation for their entire career and wish to top up their savings.”
Importantly the government will boost funding for the corporate and prudential watchdogs as well as the tax office.
The tax office will get a further $42 million over four years to increase efforts to recover unpaid tax and superannuation liabilities from larger businesses and high wealth individuals.
Additionally, more money will go to the Fair Work Ombudsman to address sham contracting arrangements designed to avoid payment of statutory obligations such as the Superannuation Guarantee.
Tuesday’s Federal Budget is set to include $606.7 million over five years to facilitate the government’s response to the Hayne royal commission recommendations.
The lion’s share of that amount will go to ASIC and APRA to enable oversight and enforcement to be strengthened.
“The FSC supports the additional funding and increases in regulator resourcing. Appropriate resourcing is essential to enabling APRA and ASIC to properly perform their respective regulatory functions,” Loane said.
The funding components of this package were announced last month.