May 2018
A number of proposed changes to super were announced in the 2018 Federal Budget.
In what’s widely anticipated to be the last budget until the next election, Federal Treasurer Scott Morrison announced that default Death and TPD insurance within super will be ‘opt-in’ for under 25s, people with low balances and people with inactive accounts. He also announced additional measures to protect people with low balances.
As expected, he also announced a raft of personal tax cuts aimed at low and middle-income earners, and confirmed the government’s earlier intent to not increase the Medicare levy.
At the time of writing, any Budget announcements are proposals only and shouldn’t be considered final until legislation passes. We’ll continue to keep you updated as developments occur.
The announcements in detail
MAKING INSURANCE WITHIN SUPER OPT-IN
From 1 July 2019, default death and TPD insurance within super will be offered on an opt-in basis for:
- members with balances of less than $6,000,
- members under 25, and
- members with inactive accounts that haven’t received a contribution in 13 months.
What this means
The government hopes that this measure will allow people to grow their balances faster, and protect people with low balances. Members who fall into these categories would still be able to apply for insurance cover if they choose to do so.
BANNING EXIT FEES
The government proposes to ban exit fees when people change super funds, making it more affordable for those wanting to combine their super.
What this means
Many super funds—including UniSuper—already don’t charge exit fees.
LIMITING FEES FOR LOWER BALANCES
From 1 July 2019, the government propose to limit administration and investment fees on super accounts with balances of less than $6,000 to 3%. This measure forms part of the Government's Protecting Your Super Package.
REUNITING LOST SUPER
The ATO will be given more authority to proactively transfer any lost or inactive super accounts with balances of less than $6,000 to people’s active super accounts.
HIGH INCOME EARNERS BREACHING THE CONCESSIONAL (BEFORE-TAX) CAP TO OPT-OUT OF THE SUPERANNUATION GUARANTEE (SG)
From 1 July 2018, eligible people whose income exceeds $263,157 and have multiple employers may be able to negotiate that their salary from certain employers won’t be subject to the SG. This measure also forms part of the Government's Protecting Your Super Package.
What this means
This means eligible high-income members will be able to avoid inadvertently breaching the $25,000 concessional cap as a result of multiple compulsory SG contributions. Eligible individuals who do this will be able to negotiate to receive additional income, taxed at marginal tax rates, instead of SG contributions.
It’s unclear how this measure will apply to Defined Benefit Division members. We’ll update our website as more information becomes available.
TAX CUTS FOR LOWER- AND MIDDLE-INCOME EARNERS
The Government announced tax relief for low and middle income earners as part of a seven-year plan to reform personal income tax. This proposal includes:
-
the introduction of a new non-refundable Low and Middle Income Tax Offset from 2018-19 to 2021-22, aimed at providing tax relief of up to $530 for each of those years. The offset will be in addition to the existing low income tax offset (LITO), and
-
from 1 July 2018, a change to the top threshold of the 32.5% tax bracket from $87,000 to $90,000.
This table summarises the tax rates and thresholds from 2018-19 year onwards, excluding the 2% Medicare levy:
Tax rates and thresholds
| Rate |
2018-19 to 2021-22 |
2022-23 and 2023-24
|
2024-25 onward |
| 0% |
$0 - $18,200
|
$0 - $18,200
|
$0 - $18,200
|
| 19% |
$18,201 - $37,000
|
$18,201 - $41,000
|
$18,201 - $41,000 |
| 32.5% |
$37,001 - $90,000 |
$41,001 - $120,000
|
$41,001 - $200,000
|
| 37% |
$90,001 - $180,000 |
$120,001 - $180,000 |
n/a |
| 45% |
$180,001+ |
$180,001+
|
$200,001+
|
For more specific information about how you might be affected, visit the Budget website.
Other minor announcements
WORK TEST EXEMPTION FOR RECENT RETIREES
From 1 July 2019, the government will introduce an exemption from the work test for voluntary contributions by individuals aged 65-74 with super balances below $300,000 in the first year that they don’t meet the work test requirements.
IMPROVING NOTICE OF INTENTION TO DEDUCT PROCESS
The government announced measures to improve the integrity of the notice of intent (NOI) processes for claiming deductions for personal super contributions.
What this means
The ATO will modify income tax returns to alert people to the NOI requirements with a tick box to confirm whether they’ve complied. This aims to ensure that any deductible contributions are appropriately taxed by super funds and enable the ATO to deny deductions who don’t comply with the NOI requirements.
This requirement is even more important from the 2017-18 financial year, given that individuals up to age 75 can now deduct personal contributions, regardless of whether they earn 10% or more of their income from employment (provided that the other requirements are satisfied).
Keep up with the latest developments
For expert insight into this year’s Budget announcements, register now for our upcoming live Q&A webcast with UniSuper’s Industry Policy Manager Benedict Davies on Thursday 10 May at 1.00pm (Melbourne time). You’ll get the chance to hear from our resident expert and ask any questions you may have about this year’s proposals.
For more on this year’s budget and how it may affect you, keep an eye out for updates on our website as they become available, and check out the government’s official Budget website in the meantime.