Despite much speculation, the Government did not make any unexpected changes to super for the 2020-21 financial year. Previously announced COVID-19 measures in relation to early access to super and pension drawdown relief will continue.
The main reform announcements in the Budget were designed to reduce the number of duplicate employee accounts as a result of changes in employment and to provide information about underperforming funds.
There is a bit to unpack, so let’s get started…
SMSFs
(if you don’t know what this is then you don’t have one, so skip this section)
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| This year’s Federal Budget was unexpected good news for anyone with an SMSF, as there were no tax changes to income nor contributions that many expected.
The Budget did confirm that the increase in the maximum number of members of SMSFs from four to six members will go ahead.
That’s it… so let’s move on. |
Your Future, Your Super Reforms
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| The Government will implement reforms to improve outcomes for superannuation fund members.
The reforms will reduce the number of duplicate accounts held by employees as a result of changes in employment and prevent new members joining underperforming funds.
From 1 July 2021, the Your Future, Your Super package will improve the superannuation system by:
1. Having your super account follow you.
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| Preventing the creation of unintended multiple super accounts when employees change jobs, by “stapling” super funds to members; |
2. Increasing transparency and accountability.
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| Greater transparency and accountability of superannuation funds to ensure the trustees maximise members’ retirement savings.
So what does that mean? It means that measures will be introduced to ensure that trustees only act in the best financial interests of members. They want superannuation funds to provide better information regarding how they manage and spend members’ money.
It will be interesting to see if the big advertising budgets of some Industry Funds can pass this test. Does spending current member dollars on advertising to attract new members maximise the retirement benefits of current members?
It must cost a bomb for prime-time advertising space & to sponsor the official App of the AFL (& other high-profile Apps). With this new scrutiny will there be a few less Corporate Boxes at the footy or concerts? We’ll see… but we’ve always wondered who gets invited to these Boxes anyway? As the fund members are paying for them, do they get to go? Or is it the board of directors, family, friends, VIPs or someone else on the dime of the members? |
3. Reforms to MySuper
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| — explained in the next section. |
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Reforms to MySuper
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What are MySuper funds?
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| MySuper funds act as a default account for people who don’t choose their own super fund when they start a new job. |
What are the improvements?
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- Making it easier to choose a better fund.
Members will have access to a new interactive online YourSuper comparison tools which will encourage funds to compete harder for members’ savings. This tool will be developed and maintained by the ATO, and enable new employees to select the right MySuper fund for themselves when they start work;
- Holding funds to account for underperformance.
To protect members from poor performing funds and encourage funds to lower costs, the Government will require MySuper products to meet an annual objective performance test. Those that fail will be required to inform members. Persistently underperforming products will be prevented from taking on new members.
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So, the ATO will develop systems so that new employees are able to select superannuation products which would:
- Provide a table of simple super products (MySuper) through a ‘YourSuper’ portal;
- Rank MySuper funds by fees and investment returns;
- Establish links to MySuper websites to choose a suitable product; and
- Help anyone to consolidate multiple superannuation fund accounts.
Existing Superannuation
- Anyone with existing superannuation will have their account linked when changing employment to avoid the creation of new multiple accounts. This would occur where an employee does not nominate a fund at the time of changing employment. The employer would make contributions to the employee’s existing fund which is made available via the ATO’s website.
- For anyone without a superannuation account, the employer would make the employee’s contributions to the employer’s nominated default superannuation fund. Some think this is an indirect shot at the very powerful union movement & the increasing influence of Union & Industry Funds… these:
- From 1 July 2022, non-MySuper funds will be added to the performance benchmarking review lists.
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No Changes To…
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There was no or little change in some of the previously announced superannuation measures. These included:
- No further mention of the proposed change to increase the age for non-concessional contribution (NCC) bring-forward purposes to 67 years of age. The bill to enact this previously announced measure is still currently before parliament;
- No change to the COVID-19 temporary early release of super measure. Eligible Australian and New Zealand citizens and permanent residents continue to be allowed just one withdrawal opportunity of up to $10,000 from 1 July 2020. The application must be made for release by 31 December 2020;
- The temporary reduction in minimum pension drawdown rates by 50% for the 2019-20 and 2020-21 years. Minimum payment amounts are calculated on the basis of asset values on 1 July of each income year.
- Confirmation of the deferred start date for a number of previously announced SMSF measures:
- Increasing the maximum number allowed members in an SMSF (or Small APRA funds) from four to six – start date deferred to the date of Royal Assent of the enabling legislation. This bill has been referred to the Senate Economics Legislation Committee, due to report on 4 November 2020.
- Changes to the calculation of exempt current pension income have also been deferred from 1 July 2020 to 1 July 2021, to apply for the 2021/22 financial year.
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In Conclusion
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| It will be interesting to see how these changes are implemented for new employees and anyone who finds themselves a member of an underperforming fund.
One thing is for certain, SMSFs members are considered engaged and interested.
This includes:
- The performance of their fund
- A considered choice that provides a competitive advantage to other funds
- Provides transparency in investment selection.
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Date Published: November 02, 2020 | Last Modified: November 16, 2021