Five important changes that hit superannuation in 2020
It's been a big year for changes to superannuation, with a raft of updates kicking in from July 1, more announced in the late Federal Budget, and further developments to come into effect this December.
Here's a recap of what they mean for you, your fund, and your future retirement.
1. Portability of super
Following announcements in the Federal Budget, super funds will have to allow for portability of super and allow members to bring their own super funds to new jobs to prevent people accumulating funds and paying multiple sets of fees.
And from July 1, 2021, the government will provide YourSuper, a new tool to compare the returns and performance of super funds.
The government will also be monitoring and taking action against funds that are underperforming.
2. Removal of the work test to age 67
Until June this year, super members aged 65 and 66 were unable to contribute to super unless they could prove they were working at least 40 hours over 30 consecutive days.
The July 1 change means those members can now continue to put money into their retirement savings of up to $25,000 as a concessional contribution, or $100,000 as a non-concessional contribution.
This gives slightly more flexibility to people who may be working part time, or are nearing retirement and want to build their super balance.
3. Extension of the Bring Forward Rule
The extension of the Bring Forward Rule to allow retirees aged 65 and 66 to make up to three years' worth of voluntary after-tax non-concessional contributions to their super (to a maximum of $300,000), as long as no additional after-tax contributions were made for two years following, has been delayed.
4. Increase to the age limit on spouse contributions
The age limit for receiving spouse contributions to super has been lifted from age 69 to 74. This means that a person can now keep making voluntary payments to their partner's super until their partner turns 74.
Until June 30, 2020, it was only possible to make spouse contributions up until the age of 70 years. Between the ages of 65 and 70 years, the spouse was required to meet the work test of 40 hours in 30 consecutive days for the year in which the contribution was made.
From July 1, 2020 this was extended to apply to spouse contributions made between the age of 67 years and 28 days in the month after the spouse reaches 75 years old, which puts it in line with other personal superannuation contributions.
The work test must be met prior to the spouse contributions being made to the fund.
5. Early access to super scheme
Following the government announcement in March that people who had suffered financial hardship due to COVID-19 were able to withdraw up to two rounds of $10,000 from their super fund, the second round of $10,000 may now be accessed.
Only one application can be filed in this financial year and it must be lodged by December 31, 2020.
Correction: An earlier version of this article said the extension of the Bring Forward Rule had been legislated. It is yet to be passed by parliament.