February 2018
Legislative update
2017 Federal budget
Two measures affecting super from the 2017 Federal Budget became law in December 2017.
There are tax and other financial issues to consider with both of these measures, so we recommend you seek financial advice if you’re interested in taking advantage of them.
First Home Super Saver Scheme (FHSSS)
The FHSSS allows people to make additional voluntary contributions to their super and release them to make a contribution to the purchase of their first home.
The scheme applies to voluntary contributions made to super after 1 July 2017. Savers can contribute up to $15,000 per year, or $30,000 in total.
Voluntary contributions include:
- concessional (before-tax) contributions (including salary sacrifice contributions), and
- non-concessional (after-tax) contributions.
The contributions will still count towards the applicable contributions caps, but can be withdrawn from 1 July 2018 to purchase a first home.
Contributing the proceeds of downsizing to super
This measure will allow the proceeds of downsizing a family home to be contributed into the super system.
From 1 July 2018, people aged 65 and over will be able to make a non-concessional (after-tax) contribution of up to $300,000 into their super from the sale of their primary residence. These contributions won’t count towards the concessional or non-concessional contributions caps.
Your ability to make a downsizer contribution isn’t affected by the ‘total superannuation balance’ test. This means that if you have a total super balance of $1.6 million or more, you’ll still be able to make these top-ups. Note, though, that the ‘transfer balance cap’ will still limit the amount that you can transfer to the concessionally-taxed pension environment.
Other announcements
In September 2017, the Government announced a raft of proposed changes to super under the heading: Improving accountability and member outcomes in superannuation announcement. If legislated, these proposals would introduce:
- a new Outcomes Test—requiring trustees to undertake an annual determination to ensure outcomes are in the financial interests of their members
- Enhanced powers for the Australian Prudential Regulation Authority (APRA)
- A new penalty regime—aligning the superannuation director penalty regime with the penalty regime that applies to directors of managed investment schemes
- Annual members’ meetings—requiring super funds to hold annual members’ meetings to allow members to ask questions about all areas of performance and operation, and
- An extension of Choice of Fund—which would remove the exemption from Choice for those covered by Enterprise Bargaining Agreements (EBAs). If legislated, once a new EBA is made after 1 July 2018, employers will be required to offer Choice of Fund to most of their staff. The Choice rules include an exemption for defined benefit members (i.e. defined benefit members won’t be eligible for Choice of Fund, but new employees who are not yet defined benefit members will be entitled to Choice). UniSuper is currently working through the implications of these proposals which, if legislated, will take effect progressively from 1 July 2018.
Financial System Inquiry
Another public policy issue we’ve been closely monitoring is the Financial System Inquiry’s recommendations that super funds develop new ‘comprehensive income products for retirement’ (CIPRs). These would include a longevity component, such as a lifetime pension. Given this recommendation remains in the early stages of policy development, funds have not yet ventured into this market.
The Government has also proposed new legislation to create a new body, the Australian Financial Complaints Authority (AFCA). It would replace the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT) and provide a one-stop shop for consumer dispute resolution.
The proposed AFCA launch date is expected to be 1 July 2018, meaning all new complaints would need to be referred to the AFCA. A transition period would see any existing SCT matters reviewed before 1 July 2018 managed until the SCT ceased operating on 30 June 2020.
We’ll keep you updated with developments as they come to hand via our website.
UniSuper update
On 1 October 2017, we implemented the following insurance changes:
- For Defined Benefit Division members exercising day one contribution flexibility, we extended the time period in which they can send us their fully completed and signed application forms for default insurance cover. The time period is now 60 days (it used to be 30 days).
- For Income Protection cover, we removed ‘unarmed security guards employed within the sector’ from the list of excluded occupations.
- We introduced insurance cover for Personal Account members.
Other important updates
The following amendments have been made to the UniSuper Regulations and Trust Deed, which govern how the Fund operates.
The Trust Deed has been amended with effect from 25 November 2017 to:
- clarify the definition of ‘service fraction’ to ensure that the effect of temporary allowances on the service fraction of full-time members is no longer in doubt, and
- correct a typo in the definition of ‘taxation amount’.
The Regulations were updated on 1 October 2017 to reflect the categories of people eligible to open a Personal Account:
- former UniSuper members
- family members of current UniSuper members
- family members of a person who died while a UniSuper member
- individuals who hold (or previously held) non-remunerated or honorary positions with a participating employer, or are on the governing body of a participating employer or higher education or research sector affiliate.