Author: Emma Partenza, Manager, TAG Financial Services
Here are some of the superannuation changes that we can expect in 2021:
6 Member Funds
This Bill proposes to amend the SIS Act to increase the total number of members of an SMSF from 4 to 6. The increase in fund members would also apply to small APRA funds.
This is intended to provide greater flexibility for large families and enable them to jointly manage their retirement savings. Younger family members will be able to contribute and assist SMSF’s where the majority / largest assets are illiquid (i.e. property) in meeting their ongoing obligations such as pension minimums needed for retired members, and potentially assist in retaining these illiquid assets in superannuation on a member’s death.
Once passed, these changes are proposed to commence on the first day of the quarter after royal assent is received.
Exempt Current Pension Income (ECPI) Changes
The 2019 Federal Budget proposed two changes to ECPI:- Choice of method to calculate ECPI where SMSFs have interests in accumulation and retirement phase superannuation interests during the financial year;
– Remove the requirement to obtain an actuarial certificate when calculating ECPI using the proportionate method, where all SMSF members are fully in retirement phase for the whole financial year.
– These changes are designed to reduce administration, red tape and essentially revert back to the general industry approach (prior to 2017) of calculating ECPI. This is where there is both accumulation and retirement phase superannuation interests during a financial year, to obtain an actuarial certificate that covers the whole year.
The method that provides the fund with the best ECPI outcome should be considered.
If legislated, this will be a welcome simplification to the ECPI process.
Bring forward rule for members aged 65-67
The 2019 Federal Budget proposed increasing the work test to age 67, to align with the age pension age. This will result in members being able to contribute into their superannuation fund without having to satisfy a work test.
A new Bill: Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 is currently in front of the Senate that will also increase the 3 year bring forward rule for member’s aged 65-67, upon receiving Royal Assent. It failed to be debated before the Christmas recess.
Currently, a member aged 65 or 66 can make personal contributions (concessional or non-concessional) into their superannuation fund without having to meet the work test requirements, however, they can only do so utilising the annual cap of $100,000, that is currently in place for member’s 65 and over.
Previously, the work test and 3 year bring forward rule applied to members under 65 years of age. This change will again align the work test cut off with the bring forward provisions.
We hope an outcome is achieved swiftly in the new year to provide advisers and affected clients with sufficient time to implement strategies. The bring-forward extension will allow additional scope for further non-concessional contributions and also additional scope for withdrawal and re-contribution strategies (subject to the standard non-concessional rules) which can provide substantial tax savings on death benefits.
As always, if you have any questions, please contact us on 03 9886 0800 or via email.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686).