So again we see the superannuation space being tinkered with on budget night but it is great to see that these appear to be steps in the right direction. We are still waiting on the details for some proposals but let’s take a brief look at each measure closely.
An exemption to the work test for recently retired Australians
Currently all Australians aged 65-74 are required to meet the “Work Test” in order to make contributions to superannuation at all. This can pose an issue where a member retires after their 65th birthday, sells down some assets and wants to move the monies into their superannuation fund.
The 2018-19 budget proposes an exemption from the work test for voluntary superannuation contributions by individuals aged 65-74 with superannuation balances below $300,000 in the first year that they do not meet the work test requirements, to allow these individuals the ability to make contributions in their first year after retirement.
This measure is slated to commence on 1 July 2019.
Given that one of the 2016-17 budget proposals was to abolish the work test all together before being scrapped this measure appears a step in the right direction, although the abolishment of these tests altogether would seem a logical future decision for government.
Ability for high income earners to opt out of Superannuation
Currently the only measure available for high income salary earners to avoid breaching the Concessional Contributions Cap on their Superannuation Guarantee contributions is the Maximum Contribution Base of $54,030 per quarter. This offers no relief for high income salary earners who earn an income from multiple sources, such as doctors who may work at multiple medical facilities. These taxpayers will receive Superannuation Guarantee contributions from all of these employers and quite often exceed the Concessional Contributions Cap.
Breaching this cap results in these taxpayers being assessed on excess contributions with an additional interest charge. The process for then withdrawing these funds to pay this tax is filled with red tape.
The 2018-19 Budget proposes to allow these high income salary earners to opt out of receiving Superannuation Guarantee contributions in excess of the $25,000 concessional cap from their employers. Employees who earn over $263,157 and have multiple employers to nominate that their wages from certain employers are not subject to the superannuation guarantee. The Employees can then negotiate to receive these funds as additional salary.
This measure will save these taxpayers from inadvertently breaching the Concessional Contributions Cap and being subject to the additional taxes and red tape to remove these funds.
This measure is proposed to commence 1 July 2018 and will be welcome by many affected taxpayers and their accountants who will no longer be required to fill out the forms requesting funds be released from super due to breaching the caps.
Three Year audit cycle for SMSF’s with good compliance history
Under this measure SMSF’s who have a clean compliance history with three clear audit reports and who have lodged their Annual Returns on time for that period, will only need to have an audit completed every three years, rather than the current annual audit.
We are not sure how this will work in practice, as it will be necessary, we believe, to audit all three years in the one year. This is important as an auditor must be able to rely on the opening balances as being correct.
This measure is slated to commence on 1 July 2019 with the government engaging in a consultation process as to its implementation prior to this date.
Thanks for reading and if you have any queries about this year’s Federal Budget tax measures, please don’t hesitate to contact us here.