Federal Budget puts under-performing super funds on notice
The changes it announced focus on ensuring all of last year's Budget changes to superannuation are still implemented.
There is also more support for Australians aged 65 or 66 years by allowing them to make extra voluntary contributions.
Regulators are getting more resources and the federal court extra funding so it can hear more misconduct cases that are expected to flow from our re-invigorated regulators.
Under the proposal to require these members to be offered insurance on an opt-in basis, the implementation date has been delayed a few months from July 1 this year to October 1.
Insurance is a big deal for young super fund members because it's costing some of them hundreds of dollars a year, money which would otherwise be going into their account balances.
Research by Rainmaker shows that the median cost for default standard cover insurance for those affected costs over $220 a year. That's a lot of money if you are just starting out in superannuation and you have little chance of ever making a claim.
The Budget's proposals for new or soon-to-be retirees are just as important. The government will allow voluntary superannuation contributions (both concessional and non-concessional being contributions paid from your after-tax salary) from July 1, 2020, to be made by those aged 65 and 66 without requiring them to satisfy the work test.
They will also be able to make up to three years of non-concessional contributions under the $300k "bring-forward" rule.
Fund members up to and including age 74 will be able to receive spouse contributions. Currently, people aged 65 to 74 can only make voluntary superannuation contributions if they work a minimum of 40 hours over a 30-day period in the relevant financial year.
Aligning the work test with the eligibility age for the age pension (scheduled to reach 67 from July 1, 2023) and increasing the age limit for spouse contributions to 74 will give older Australians greater flexibility to save for retirement.
Superannuation will get a lot more litigious.
ASIC has already told fund trustees it is coming after chronically under-performing super funds and now APRA has been provided with $70 million to focus on this as well as pursuing fund trustees that breach their "best interests" duty.
APRA is meanwhile expected to deliver on its expanded mandate as primary superannuation conduct regulator.
One of the major challenges facing super funds, especially smaller ones, is whether they should merge into larger ones.
To make this easier the Budget included the announcement that previously temporary tax relief measures will become permanent. These measures will allow them to roll over previous losses into their new funds.
Superannuation consumer protections are in the spotlight with support for the completion of casework in the Superannuation Complaints Tribunal for which the government has provided some modest additional funding.
At the same time, the Superannuation Consumer Advocate will receive a funding boost so it can undertake an expression of interest review to identify options to support the formal establishment of a Superannuation Consumer Advocate.
To help super fund members transfer money more efficiently between funds the SuperStream Rollover standard will be upgraded to cover superannuation release authorities in electronic rollovers, including to SMSFs, although its implementation date is being delayed to 2021.
The Australian Taxation Office is also receiving extra money to help them enforce on-time payment of superannuation liabilities by larger businesses and high wealth individuals.
Funding for the Fair Work Ombudsman to address sham contracting arrangements designed to avoid payment of statutory obligations such as the superannuation guarantee should meanwhile help employees of smaller businesses.
Get stories like this in our newsletters.