2020-21 federal Budget – how the announcements might affect your super
Looking for a simple summary of last week's federal Budget announcements? Don't miss Sunsuper's National Education Manager Joshua van Gestel and Head of Advice and Retirement Anne Fuchs as they discuss what the Treasurer announced and how it might impact your super and retirement planning.
7 October, 2020
On Tuesday 6 October 2020, the government released the Australian federal Budget for 2020-21.
The following is a summary of the announced measures from the 2020-21 federal Budget in relation to Australians’ super and retirement. Please note that the announcements still need to be passed in Parliament before they become law. Also note that this summary is only intended to provide highlights of the federal Budget announcements; additional detail is still to be provided by the government. This summary is not intended to communicate Sunsuper’s view or opinion on the proposals.
Read Sunsuper Chief Economist Brian Parker’s summary of the expected economic impact of the Budget.
Overview of the 2020-21 federal Budget super announcements
The government has announced that super fund members will stay with their existing super fund when they change jobs, unless they make a choice to change their fund. So any new employer will pay a person’s super into their existing super fund, unless the person chooses another fund. If it is a person’s first job and they do not make a choice for their super fund, their super will be paid into their employer’s default fund.
The Treasurer also announced that super funds offering MySuper products – which are simple, cost-effective, default superannuation products that super funds offer their members – will face greater regulatory scrutiny and will be required to pass an annual performance test. Funds that fail two consecutive annual tests will not be permitted to accept new members. These funds will not be able to re-open to new members unless their performance improves. They will also need to inform their members of their underperformance. This measure is planned to be extended to non-My Super products from 01 July 2022.
A new comparison tool for MySuper products is also to be made available to assist members in comparing superannuation funds.
The government also announced enhancements to existing requirements that super funds act in the best financial interests of members, including that funds will be required to give more information to members on how they manage and spend their members’ money before their Annual Members Meetings.
And pensioners will receive two additional Economic Support Payments of $250.
Read more in the government’s Your future your super fact sheet.
The super-related announcements in more detail
Super fund will follow members to new job
The government has announced that super fund members will stay with their existing super fund when they change jobs, unless they make a choice to change their fund. By 1 July 2021, the government plans that:
- If a new employee does not nominate a super account when they start a new job, their employer will pay the person’s super contributions to their existing super fund.
- Employers will be able to obtain information about a new employee’s existing super fund via the Australian Taxation Office.
- If an employee does not have an existing super fund and does not choose a fund, the employer will pay the employee’s superannuation into the employer’s nominated default superannuation fund.
A new tool will help people to compare super funds
The government announced a new comparison tool for MySuper products will be made available to assist people to compare super funds. To be introduced by 1 July 2021, the government’s YourSuper tool will:
- provide a table of simple MySuper super products ranked by fees and investment returns,
- link to super fund websites where a person can choose a MySuper product, and
- show a person’s current super accounts and prompt them to consider consolidating their accounts if they have more than one.
MySuper products will be subject to an annual performance test
The Budget also announced that super funds offering MySuper products will face greater regulatory scrutiny and will be required to pass an annual performance test. In particular:
- If a fund is deemed to be underperforming, it will need to inform its members of its underperformance by 1 October 2021 and provide information on the YourSuper comparison tool.
- Underperforming funds will be listed as underperforming on the YourSuper comparison tool until their performance improves.
- Funds that fail two consecutive annual performance tests will not be permitted to accept new members unless their performance improves.
There is still more detail to come from the government as to what underperforming means.
There will be no change to the temporary early access to super measure
The Budget did not contain any further changes to the early release of super measure the government put in place to help Australians through the COVID-19 pandemic. The measure is currently legislated to end on 31 December 2020.
Retirees will receive additional support payments
The government also announced that pensioners will receive two additional Economic Support Payments of $250.
Many Australians will pay lower tax
The Budget included a number of income tax-related announcements:
A one-off additional benefit from the low- and middle-income tax offset (LMITO) was announced. The benefit is worth up to $1,080 for individuals or $2,160 for dual-income couples. The Low Income Tax Offset will increase from $445 to $700.
The government also announced the bring-forward of their intended lowering of personal income taxes, consistent with their 2018-19 announcements. The income tax rates are summarised in the following table:
|Rate (%)||Current thresholds (from 1 July 2019) Income range ($)||Thresholds from 1 July 2020 Income range ($)|
|Tax free||0 – 18,200||0 – 18,200|
|19||18,201 – 37,000||18,201 – 45,000|
|32.5||37,001 – 90,000||45,001 – 120,000|
|37||90,001 – 180,000||120,001 – 180,000|
|45||> 180,000||> 180,000|
Further income tax cuts previously announced will come into effect from 1 July 2024, as shown in the following table:
|Rate (%)||Thresholds from 1 July 2020 Income range ($)||Thresholds from 1 July 2024 Income range ($)|
|Tax free||0 – 18,200||0 – 18,200|
|19||18,201 – 45,000||18,201 – 45,000|
|30||45,001 – 200,000|
|32.5||45,001 – 120,000|
|37||120,001 – 180,000|
|45||> 180,000||> 200,000|