Budget overviewThe focus of this year’s federal Budget was on personal tax cuts. The government also proposed three changes to superannuation aimed at helping older Australians make additional contributions to superannuation. Compared to previous budgets, the superannuation announcements are modest and will have little impact on most Australians.
Three changes to superannuation were announced in the Budget. All are designed to benefit older Australians who can afford to make additional voluntary superannuation contributions.
Work test – age threshold increased by two years
People aged 65 and 66 years will be able to make voluntary concessional and non-concessional super contributions, without meeting the work test. Currently, under the work test, people aged 65-74 years can only make voluntary superannuation contributions if they work a minimum of 40 hours in any 30-day period in a financial year. Proposed start date: 1 July 2020.
Three-year bring-forward rule – age threshold increased by two years
The “bring-forward” rule, which currently allows those aged 65 years in the financial year of the contribution to make three years of non-concessional contributions to their super account in one year will be extended to those aged 66 and 67 in the financial year of the contribution. This will allow these people to make voluntary non-concessional contributions to super of up to $300,000 in a single year. Proposed start date: 1 July 2020.
Spouse contributions – age-related changes
People will also be able to make voluntary contributions to their spouse’s super until their spouse is age 74 years, up from the current cut-off of 69 years. As well, receiving spouses aged 65 or 66 will no longer need to meet the work test (see the first measure above). Proposed start date: 1 July 2020.
Other superannuation announcements
There were also a number of announcements in the Budget related to employers’ super obligations, super funds and the government’s response to the Banking Royal Commission.
ATO funding – unpaid super and SuperStream expansion
From 1 July 2020, the ATO will receive additional funding to increase its activities in recovering unpaid tax and superannuation liabilities. It will also receive additional funding to include superannuation release authorities by electronic request. This will involve expanding the electronic SuperStream Rollover Standard used for the transfer of information and money between employers, superannuation funds and the ATO. More funding will also be provided to support additional information being collected through Single Touch Payroll about gross pay amounts and other details (it is unclear whether this will include any additional superannuation-related information).
ASIC funding - Superannuation Complaints Tribunal wind-up
ASIC will receive additional funding for the SCT to resolve all outstanding complaints by 31 December 2020.
New Superannuation Consumer Advocate
The government will explore options to support the establishment of a Superannuation Consumer Advocate. This advocate would represent consumers in policy discussions and provide information to educate and help Australians to navigate the super system.
Funding to respond to the Banking Royal Commission
A range of activities will be funded by $606.7 million over five years. These include reviewing and/or better resourcing the Australian Securities and Investment Commission, the Australian Prudential Regulation Authority and the Australian Financial Complaints Authority, and establishing a compensation scheme for consumers and small business.
Proposed personal income tax cuts
The tax cut proposals announced in the Budget are designed to be implemented over a five-year period with three key start dates:
1. From the 2018-19 financial year: An increase to the low and middle income tax offset, providing up to $1,080 for singles and up to $2,160 for dual-income families.
2. From 2022-23: An increase in the income tax threshold for the 19% tax rate from $41,000 to $45,000 plus an increase in the low income tax offset from $645 to $700.
3. From 2024-25: A decrease in the 32.5% tax rate to 30% for Australians earning between $45,000 and $200,000. According to Treasury, this will affect around 94 per cent of Australian taxpayers.