Super news for January 2020

Workers with multiple employers can now apply to opt out of receiving the super guarantee from some of their employers.

The change, which came into effect on 1 January 2020, is of particular interest to high income earners who may be unwittingly going over the concessional contributions cap.

According to the Australia Taxation Office (ATO), you may be eligible to opt out if you have more than one employer and expect your employers’ mandated concessional super contributions to exceed your concessional contributions cap for a financial year.

Concessional contributions are made into your super fund before tax and include compulsory employer contributions and salary sacrifice payments. Caps apply on these contributions and if you exceed them you may need to pay extra tax.

The exemption certificate means employers will not be liable for the super guarantee charge if they don’t make super guarantee contributions on your behalf for the quarters covered by the certificate. 

Learn more about the superannuation guarantee in our simple guide to Superannuation Guarantee (SG) contributions.

Beware promises of early super

Promoters of schemes that promise early access to your super continue to crop up despite Australian Tax Office warnings.

As the festive season got underway late last year, the ATO, which regulates self-managed super funds, took one promoter of an illegal early-release scheme to the Federal Court.

The Australian Securities and Investments Commission (ASIC) claims some promoters charge fees amounting to a fifth or more of the withdrawn super amount and in worst cases, can even steal the lot.

Dodgy promoters will be fined and banned from providing financial services, but clients can also end up in trouble. As well as having to pay tax on the money, along with interest and possible financial penalties, if a promoter persuades a client to sign false statements, the client could even face prison time.

Problems of illegal early access usually arise where members have not yet triggered a condition of release between the ages of 60 and 65. It may be triggered if a member loses their job, leaves it voluntarily or is working at both a full time and part time job and ceases either of them.

It is far more difficult for members under the age of 60 to receive their super, although funds may still be accessed on compassionate grounds or due to severe financial hardship.

Price of meds are down

The new year brings some good news for pensioners buying medications. From January 1, 2020, the Pharmaceutical Benefit Scheme (PBS) Safety Net thresholds were lowered from $390 to $316 for concessional patients and from $1550.70 to $1486.80 for general patients.

Federal Minister for Health, Greg Hunt, says the threshold to receive free or discounted medicines through the PBS has been lowered by 12 scripts for pensioners and concession card holders and the equivalent of two scripts for non-concession card holders.

“With these price reductions, a trip to the pharmacist will be cheaper for thousands of Australians, and more life-saving drugs can be listed on the PBS,” My Hunt says.

For more information on the lower thresholds visit humanservices.gov.au.

Financial advisers now bound by ethics

In the wake of the Royal Commission, financial advisors in Australia must now comply with a new set of principles and core values intended to shape every aspect of their professional conduct.

Issued by the Financial Adviser Standards and Ethics Authority (FASEA), the Code of Ethics came into effect on January 1 and will be supervised by the Australian Securities and Investments Commission (ASIC).

The FASEA standards will be phased in between now and 2024. The Code of Ethics is now in place and other standards will address education and professional development, including trust, competence, honesty, fairness and diligence.

While the industry has focussed on the educational standards, it’s the ethical standards, and the regimes to enforce them, that have the potential to revolutionise financial advice. These will impact planners, as well as licensees and funds.

Planning for sustainability

APRA’s new standard SPS 515, which requires all superannuation trustees to commit to a business performance review and outcomes assessment, was launched on January 1, 2020.

It follows the release of the Australian Prudential Regulation Authority’s MySuper Heatmap last December and provides additional transparency on current and future member outcomes.

Along with fees, costs, and investment performance, sustainability is one of the three areas to be assessed. In an industry where retirement outcomes are delivered over decades, rather than months or years, funds need to deliver value-for-money member outcomes in the long-term.

Two measures will provide the baseline for considering future fund sustainability: the net assets available for members’ benefits and the total number of member accounts.

While not a guarantee to good performance, size does matter when it comes to superannuation. Big funds are likely to do better at negotiating discounts with service providers, accessing investment markets, and spreading the cost of operations over their larger membership base.

APRA expects trustees to consider their outcomes to better understand the factors that drive them and to then put a plan in place for any sustainability concerns the new standard reveals.