Following the surprise coalition victory, refresh yourself on what the Liberals and Nationals pledged on super, tax and other retirement measures. This article summarises the Coalition’s main election announcements related to superannuation, tax, investing and matters that may affecting your retirement planning.
Many of these policies were announced in this year’s Federal Budget – see SuperGuide article 2019 Federal Budget overview: Super, tax and related announcements for more detail.
The Coalition proposed fewer super and tax election policies than the ALP, mainly because they have been in government since 2013 and have already introduced significant changes to superannuation and the Age Pension since then. For an overview of the key changes the Coalition have made in recent years see SuperGuide article The rules of superannuation: Your guide for 2019/2020.
Both the Coalition and the ALP pledged no new taxes on superannuation beyond what they have already announced.
Note: You can read an overview of Labor’s super and retirement policies here.
The Coalition have several superannuation and retirement policies that they proposed to implement if elected, including:
- Work test exemption for ages 65 and 66
- Bring-forward extension for ages 65 and 66
- Spouse contributions allowed up to 74
- Simplifying ECPI calculations
- Expansion and delay of SuperStream Rollover Standard
- Superannuation Consumer Advocate
- Protecting your super package amendments
- Encouraging super fund mergers
- Additional funding for ASIC, APRA and their own regulator
- Allowing SMSFs to have 6 members
The Coalition also announced general taxation policies that they propose to implement if elected, including:
- An immediate increase in the Low and Middle Income Tax Offset (LMITO)
- A future increase in the Low Income Tax Threshold (LITO)
- A future increase in the top threshold for the 19% tax bracket
- A future reduction in the 32.5% tax bracket to 30%
The Coalition announced three measures in the 2019 Federal Budget that will allow older Australians to make superannuation contributions from 1 July 2020 onwards.
Work test exemption for ages 65 and 66
Australians aged 65 and 66 will be allowed to make voluntary superannuation contributions (both concessional and non-concessional) without meeting the work test. Currently, people aged 65 to 74 can only make voluntary superannuation contributions if they self-report as working a minimum of 40 hours over a 30-day period in the relevant financial year. The objective is to align the work test with the eligibility age for the Age Pension (scheduled to reach 67 from 1 July 2023).
Bring-forward extension for ages 65 and 66
Those aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring-forward rule. Currently you cannot access bring-forward arrangements when you’re aged over 65.
Spouse contributions allowed up to 74
Those aged up to and including 74 will be able to receive spouse contributions. Currently you cannot receive spouse contributions when you’re aged 70 and over.
Simplifying ECPI calculations
From 1 July 2020 trustees with interests in both the accumulation and retirement phases during an income year will be allowed to choose their preferred method of calculating ECPI. This will also mean super funds don’t need to obtain an actuarial certificate when calculating ECPI using the proportionate method, where all members of the fund are fully in the retirement phase for all of the income year.
Expansion and delay of SuperStream Rollover Standard
The ATO will receive $19 million to facilitate the inclusion of 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. To coincide with this the start date for SMSF rollovers in SuperStream will be delayed until 31st March 2021.
Superannuation Consumer Advocate
The Government will provide $100,000 to undertake an expression of interest process to identify options to support the establishment of a Superannuation Consumer Advocate. The Advocate would represent consumers in policy discussions and provide information to educate and help Australians to navigate the super system.
Protecting your super package amendments
The Government announced minor amendments to the Protecting Your Super Package announced in last year’s Budget. This Package is designed to reduce the erosion of low-balance accounts by fees and insurance. The amendments are not all positive and the delays suggest there are issues with implementation within last year’s projected timeframe. The measures announced include:
- extending to 16 months (from 13 months) the period after which an account that has not received any contribution is considered inactive,
- expanding the definition of when an account is considered active before consolidation by the ATO, and
- requiring the ATO to consolidate to an active account (where possible) within 28 days of receipt.
The Government is also delaying the start date to 1 October 2019 (from 1 July 2019) for ensuring insurance within superannuation is only offered on an opt-in basis for:
- accounts with balances of less than $6,000, and
- for new accounts belonging to members under the age of 25 years.
Encouraging super fund mergers
The current tax relief for merging superannuation funds (due to expire on 1 July 2020) will be made permanent. Since December 2008, tax relief has been available for superannuation funds to transfer revenue and capital losses to a new merged fund, and to defer taxation consequences on gains and losses from revenue and capital assets.
Additional funding for ASIC, APRA and their own regulator
ASIC will get additional funding of $405 million so that it can carry out “an accelerated enforcement strategy”, implement an enhanced onsite supervisory capability for large institutions, and deliver on its expanded role in relation to superannuation (as recommended by the Royal Commission).
APRA’s budget will be increased by $152 million to strengthen its supervisory and enforcement activities, including in relation to governance, culture and remuneration, as well as to enhance their regulation of superannuation funds.
The Government will also establish a new Financial Regulator Oversight Authority as recommended by the Royal Commission to assess ASIC’s and APRA’s effectiveness on an ongoing basis.
Allowing SMSFs to have 6 members
Currently SMSFs can have up to 4 members but then Treasurer Scott Morrison announced in the 2018 Federal Budget that this was to be expanded to a maximum of 6 members. This was due to be in place by 1 July 2019. The legislation never passed through parliament and was dropped.
Also announced in the 2018 Federal Budget was the plan to allow SMSF audits to only take place every 3 years rather than annually. This also has not passed through parliament and it is now not mentioned in the Liberal Party election policies.
In the 2019 Federal Budget, the Coalition government also announced an expansion (or “enhancement”) of the Personal Income Tax Plan tax relief announced in the 2018 Federal Budget.
A summary of how the coalition’s tax policies will affect income tax rates over current and future financial years is provided below, provided they remain in government. It’s important to understand that Labor has different tax policies that they plan to implement if they win the May 18 election.
An immediate increase in the Low and Middle Income Tax Offset (LMITO)
The Low and Middle Income Tax Offset (LMITO) will increase from this financial year to a new maximum of $1,080 (from $530). The base amount will increase from $200 to $255 for 2018-19 and for the next three income years.
Treasury predicts that this LMITO increase will result in about 4.5 million taxpayers with taxable incomes between $48,000 and $90,000 receiving the full $1,080 reduction in tax for 2018/19. In addition, they forecast that around 2.3 million Australians with taxable incomes less than $37,000 will receive an offset of up to $255.
A future increase in the Low Income Tax Threshold (LITO)
The Low Income Tax Offset (LITO) threshold will increase from $645 to $700 starting in the 2022/2023 financial year.
A future increase in the top threshold for the 19% tax bracket
The top threshold of the 19 per cent tax bracket will increase from $41,000 to $45,000 from the 2022/2023 financial year. Treasury estimates this will stop around 590,000 taxpayers from entering the 32.5% tax bracket in 2022/2023.
A future reduction in the 32.5% tax bracket to 30%
This tax bracket will be reduced by from 32.5% to 30% from the 2024/2025 financial year. It’s projected that 94% of taxpayers will face a marginal tax rate no higher than 30% from then.
The information contained in this article is general in nature.