An SMSF-friendly budget is the good news to come out of the 2018-19 Federal Budget. With SMSF members still working through the wide-reaching and complex superannuation changes which took effect from July 1 last year, this Federal Budget will provide much needed stability while looking to reduce costs for SMSFs and prove additional flexibility.
The key changes proposed for SMSFs and superannuation are:
Three‑yearly audit cycle for some self‑managed superannuation funds
The Government will change the annual SMSF audit requirement to a three-yearly requirement for SMSFs with a history of good record keeping and compliance. The measure will start on 1 July 2019 for SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged the fund’s annual returns in a timely manner.
Expanding the SMSF member limit from four to six
As already announced, the Federal Government confirmed its decision to expand the number of members allowed in an SMSF from four to six. Expanding the definition of an SMSF to a fund with a maximum of six members will provide greater flexibility in how funds can be structured.
Work test exemption
The Government will provide more time for Australians aged 65 to 74 to boost their retirement savings, by introducing an exemption from the superannuation work test.
This exemption will apply where an individual’s total superannuation balance is below $300,000 and will permit voluntary superannuation contributions in the first year that they do not meet the work test requirements.
Life insurance cover in super to be opt-in for individuals under 25 years of age
The Government will legislate that life insurance cover in superannuation will be opt-in for those individuals under 25 years of age or with account balances under $6000 to ensure that unnecessary fees do not erode smaller balances. Life insurance cover will also cease where no contributions have been made for a period of 13 months.
Older Australian package
The Government introduced the following measures to enhance the standard of living older Australians:
- Increase to the Pension Work Bonus from $250 to $300 per fortnight.
- Amendments to the pension means test rules to encourage the take up of lifetime retirement income products.
- Expansion of the Pensions Loan Scheme to allow more Australians to use the equity in their homes to increase their incomes.
Personal income tax bracket changes
The Government has provided personal income tax relief to lower and middle income earners. A Low and Middle Income Tax Offset will now be available for individuals with incomes of up to $125,333.
The $87,000 income threshold, above which a 37 per cent tax rate applies, will increase to $90,000.
A surplus of $2.2 billion is expected in 2019-20, one year ahead of schedule.
The Government’s planned increase in the Medicare levy from 2 per cent to 2.5 per cent, to fund the National Disability Insurance Scheme, will now not go ahead due to increased tax revenues.
Have further questions about the Budget impacts on your SMSF? Contact Peak Super today by clicking here.