When you mention super, most people shake their head and mutter about the constant rule changes. Looking back over the past few years it’s a fair comment, with many significant changes occurring – and many more proposed but never legislated.
If you are wondering how those changes have affected your super and retirement plans, here’s a quick guide to the key changes and when they commenced.
To help you navigate them, this article is divided into three main sections, with handy links to other SuperGuide articles if you want to read more:
Important note
The Morrison Government has quite a few proposals on the books in relation to the super system, many of which are yet to be legislated. These include the introduction of retirement income products, changes to SMSF trustee numbers, protection of unpaid super, opt-in insurance cover and choice of fund changes.
Several significant super-related promises have also been made during the election campaign, but whether any of these actually turn into legislation remains to be seen.
1. New rules in 2017/2018
When it comes to super changes, they don’t get much bigger than the package of new rules that came into effect on 1 July 2017. These new rules represent one of the biggest ever shake-ups of the super system and included:
$1.6 million Transfer Balance Cap established
From 1 July 2017, the amount that can be transferred and held in a super fund member’s tax-free retirement phase account is capped at $1.6 million over a lifetime. Fund members receiving a pension or annuity valued at over this amount were required to transfer the excess back into the accumulation phase or pay additional tax.
For more information, see SuperGuide article Definitive guide to the $1.6 million transfer balance cap.
Total Superannuation Balance introduced
From 1 July 2017, super accounts now have a Total Super Balance (TSB) calculated each year on 30 June to value a fund member’s assets across the entire super system. The TSB is used to track and limit the amount of savings you can have in the super system. The Total Super Balance consists of all accumulation phase super interests, the balance of your transfer balance account (basically your retirement phase pension), and any rolled over super benefits.
For more information, see SuperGuide article What is included in my Total Superannuation Balance, and when does it apply?
Capped defined benefit income streams introduced
From 1 July 2017, a new category of super pensions was created called capped defined benefit income streams. These pensions have special valuation rules for transfer balance cap and TSB purposes.
For more information, see SuperGuide article Definitive guide to the $1.6 million transfer balance cap.
Reduced concessional contributions cap
On 1 July 2017, a new annual concessional (before-tax) contributions cap was set at $25,000 for everyone, regardless of their age. Concessional contributions were also defined to include employer contributions (SG contributions, salary sacrifice payments and other amounts paid from pre-tax income such as administration fees and insurance premiums), personal tax-deductible super contributions, notional taxed contributions from defined benefit fund members and unfunded defined benefit contributions.
For more information, see SuperGuide article 2018/2019 guide to concessional contributions(before-tax super contributions).
Division 293 (additional tax on concessional contributions) threshold lowered
From 1 July 2017, the threshold for paying Division 293 tax (an additional surcharge on concessional contributions) was reduced from $300,000 to $250,000. If you are liable for Division 293 tax, you pay an additional 15% on the amount of your concessional contributions over the $250,000 threshold.
For more information, see SuperGuide article How the Division 293 tax works: Super surcharge for high earners
Low income super tax offset (LISTO) introduced
The LISTO came into effect on 1 July 2017 as a renamed version of the existing Low Income Superannuation Contribution (LISC). LISTO acts as a refund for the tax paid on concessional contributions you or your employer make into your super account if your taxable income is less than $37,000. This means as a low income earner you pay no tax on your super contributions if you are eligible for LISTO. The ATO determines your eligibility.
For more information, see SuperGuide article Learn to love LISTO: Low income earners get their super tax refunded.
Personal super contribution deduction available
From 1 July 2017, anyone aged under 75 can claim a tax deduction for personal contributions they make to super up to their annual $25,000 concessional contributions cap. If you are aged between 65 and 74, you need to meet the requirements of the work test. The $25,000 cap also includes employer and salary sacrifice contributions.
For more information, see SuperGuide article Guide to tax-deductible superannuation contributions.
Lower non-concessional contribution cap and new limit
From 1 July 2017, the annual non-concessional (after-tax) contributions cap was set at $100,000, with future increases to be in line with indexation of the concessional (before-tax) contributions cap. In addition, if your Total Super Balance is more than $1.6 million, you are ineligible to make additional non-concessional contributions without paying additional tax.
For more information, see SuperGuide article 2019/2020 guide to non-concessional contributions (after-tax super contributions) and What is included in my Total Superannuation Balance, and when does it apply?
Anti-detriment payment abolished
From 1 July 2017, anti-detriment payments are banned for any super fund member deaths from that date. Super funds can make anti-detriment payments to eligible dependants up to 30 June 2019 for fund members who died prior to 1 July 2017.
For more information, see SuperGuide article What is an anti-detriment payment?
Transition to retirement income streams taxed
From 1 July 2017, investment earnings on assets supporting a transition to retirement (TTR) income stream are no longer tax-free, with a 15% tax applying until retirement.
For more information, see SuperGuide articles Guide to transition to-retirement-pensions (TTRs or TRISs) and Did tax kill the transition to retirement magic pudding?
Co-contributions eligibility expanded
From 1 July 2017, two additional criteria were added to eligibility to receive government co-contribution payments. The new criteria are your non-concessional contributions must not have exceeded the non-concessional contributions cap for that year and your TSB must not have exceeded the general Transfer Balance Cap ($1.6 million in 2019/2020) on 30 June of the previous financial year.
For more information, see SuperGuide article Gaining from the government: How you can score a co-contribution freebie.
Spouse contributions expanded
From 1 July 2017, the spouse superannuation tax offset was expanded by lifting the income threshold for an eligible receiving spouse to $40,000 per year.
For more information, see SuperGuide article Contribution splitting: How to boost your spouse’s super.
Departing Australia Superannuation Payment (DASP) introduced
From 1 July 2017, super funds are required to apply a tax rate of 65% to the taxable component of a DASP. The tax-free component continues to be tax-free.
For more information, see SuperGuide article Early release of super through the Departing Australia Superannuation Payment (DASP).
Extension of tax exemption for other types of retirement products
From 1 July 2017, the tax exemption on earnings in the retirement phase was extended to products such as deferred retirement products and group self-annuities.
For more information on deferred annuities, see SuperGuide article Retirement income: When is the optimal time to purchase a deferred annuity?
2. New rules in 2018/2019
The dawn of a new financial year saw some additional changes to the super system:
Downsize your home and add to your super
From 1 July 2018, people aged 65 or over can make contributions into their super account of up to $300,000 ($600,000 for a couple) using the proceeds from the sale of their main residence. Although these ‘downsizer’ contributions are considered non-concessional (after-tax) contributions, they are in addition to any voluntary contributions made under the current non-concessional contributions cap ($100,000 in 2019/2020).
Downsizer contributions can be made regardless of your annual non?concessional contributions cap position and whether you meet the requirements of the work test. If you are aged 75 and over, you can still make a downsizer contribution even if you have never worked.
For more information, see SuperGuide article Downsizer contributions: How do they work and what are the current rules?
Using your super to save a home deposit
From 1 July 2018, any super contributions made into a super account as part of the First Home Super Saver (FHSS) Scheme can be withdrawn and used to help purchase a first home. Under the FHSS Scheme, first homebuyers can make voluntary contributions of up to $15,000 a year into their super account (to a maximum of $30,000) and later withdraw then (plus the associated earnings) to help purchase a home.
To qualify, you must live in the property you buy (or intend to in the near future) and intend to live in it for at least six months in the first 12 months you own it. Accessing the money requires an application to the ATO and if eligible, a one-time-only withdrawal is permitted.
For more information, see SuperGuide article How does the First Home Super Saver Scheme (FHSSS) work?
Transfer Balance Account Reporting (TBAR) reporting starts
From 1 July 2018, all SMSFs are required to report events affecting fund members’ transfer balances, with the reporting timeframe determined by the TSB of members.
For more information about TBARs, see SuperGuide articles TBAR – Transfer balance account reporting for SMSFs and What are the Transfer Balance Account Report (TBAR) rules for SMSFs?.
3. New rules from 1 July 2019
Like those before it, the upcoming financial year will see yet more changes to the super rules:
Protecting Your Super reforms – starting 1 July 2019
The Protecting Your Super reform package was legislated to protect Australians’ super accounts from being eroded by insurance policy fees and premiums they may not require. The key reforms are:
Insurance within inactive super accounts
Your super fund will be required to cancel the insurance cover that goes with your super account if your super account is deemed to be inactive. Under the legislation, super accounts are considered inactive if they have not received any contributions or rollovers for more than 13 months.
Super funds are required to inform fund members they are at risk of having their insurance cancelled and giving them the option to retain their insurance cover even if they are not making regular super contributions.
For more information about insurance in super, see SuperGuide article Life insurance through super: A definitive guide.
Closure of inactive super accounts
If you have an inactive super account with a balance of less than $6,000 it will be closed automatically and the balance transferred to the ATO, which will then use data matching technology to combine the low balance amount with one of your active super accounts.
For more information about inactive accounts, see SuperGuide article The easy way to find and consolidate your lost super.
Cap on fees for low balance accounts
Small super accounts with a balance of $6,000 or less at financial year-end will have their super fund fees capped at 3% per annum.
Switching funds without exit fees
Exit fees will be banned, allowing you to switch your super fund without having to pay any penalty or fee.
For more information about super fund fees, see SuperGuide articles 10 key super fund fees: What are they and why am I paying them? and What are average super fund fees?
Other rule changes – starting 1 July 2019
Significant changes to the non-concessional (after-tax) contribution rules start on 1 July 2019, plus several changes to the threshold and payments for other super and pension areas:
No work test for contributions in first year of retirement
New retirees aged between 65 and 74 will now be able to make voluntary contributions into their super account without needing to satisfy the work test. To qualify you must have had less than $300,000 in your super account at the end of the previous financial year.
The relaxation of the work test rules only applies once and you cannot make contributions in subsequent financial years without meeting the work test. Under the new rules, after age 65 work test-free contributions are only permitted in the year immediately after the one in which you last met the work test.
For more information, see SuperGuide article Work test: Making super contributions over 65.
Carry-forward concessional (before-tax) contributions start
From 1 July 2019, super fund members can make catch-up concessional contributions into their super account using their unused concessional contributions cap amounts from previous years. To qualify, you must have a Total Super Balance of less than $500,000 on 30 June of the previous financial year and you must not have used all your $25,000 annual concessional contributions cap in the previous financial year.
Under the rules, you can carry-forward up to five years of unused concessional contributions caps for use in a later financial year, but the rolled forward amounts expire after five years.
The five-year carry-forward period started on 1 July 2018, meaning 2019/2020 is the first year in which you can make catch-up contributions. If you are aged 65 or over, the normal work test rules apply.
For more information, see SuperGuide article Carry-forward contributions: How your unused contribution limits can help you catch up.
Rise in Age Pension Work Bonus
If you are receiving the Age Pension work bonus, you will get a lift in your work bonus payments from $250 to $300 per fortnight from 1 July 2019. For more information about the work bonus, see SuperGuide article Are you getting your slice of the Age Pension Work Bonus?
Pension Loans Scheme expanded
From 1 July 2019, the eligibility criteria and withdrawal amounts for the Pension Loans Scheme (PLS) will be expanded to make the scheme available to more Australians of age pension age. Under the new eligibility rules, you must still qualify for one of the eligible pensions, but you can now have a payment rate of $0 for either of the Age Pension means tests (assets or income), or be receiving the maximum pension rate.
The withdrawal amount per fortnight is increasing from 100% to 150% of the maximum fortnightly pension rate. Pensioners wishing to apply for the PLS will be able to do so using their Centrelink online account through the myGov portal. For more information, see SuperGuide article What is the Pension Loans Scheme, and how does it work?
Lifetime annuity means test change
Changes to the means test for lifetime retirement income streams or annuities come into effect from 1 July 2019. Annuity payments are included in the Age Pension income test, but under the new rules only 60% of an annuity’s purchase price will be included in the assets test rather than the previous situation where the full purchase price is included. The assessment rate will reduce to 30% for people aged over 84. For more information, see SuperGuide article What are annuities, and will they work for me?
End to anti-detriment deductions
Although anti-detriment payments were banned for any super fund member deaths from 1 July 2017, super funds could still make payments to eligible dependants for members dying prior to this date. From 1 July 2019, no anti-detriment payment deductions are available, regardless of when the member died.
For more information, see SuperGuide article What is an anti-detriment payment?
Age Pension age rises to 66
From 1 July 2019, the age at which you qualify for the Age Pension rises to 66, with the eligibility rising six months every two years until it reaches age 67 for everyone on 1 July 2023.
For more information, see SuperGuide articles What is the current Age Pension age? and Retirement age calculator: When can you access your super or the Age Pension?.
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