2019-2020 Changes to your Super

The Morrison Government has a number of proposals in relation to the superannuation, many of which have not been legislated as yet. These include the introduction of retirement income products, changes to Self-Managed Super Fund trustee numbers, protection of unpaid super, opt-in for insurance cover and choice of fund changes.

There are also some significant super-related promises that were made during the election campaign, but whether any of these actually turn into legislation remains to be seen.

The upcoming financial year will see the following changes to the super rules:

Protecting Your Super changes – starting 1 July 2019

The Protecting Your Super reform package was bought in to protect super accounts from being eroded by insurance policy fees and premiums they may not require. We sent out communication to all our members in May this year advising them of these new changes.

Here is a re-cap of the new legislations, with the key reforms being:

Insurance within inactive super accounts

Your super fund will be required to cancel the insurance cover that goes with your super account if your super account is deemed to be inactive. Under the legislation, super accounts are considered inactive if they have not received any contributions or rollovers for more than 13 months.

Super funds are required to inform fund members they are at risk of having their insurance cancelled and giving them the option to retain their insurance cover even if they are not making regular super contributions.

Closure of inactive super accounts

If you have an inactive super account with a balance of less than $6,000 it will be closed automatically and the balance transferred to the ATO, which will then use data matching technology to combine the low balance amount with one of your active super accounts.

Cap on fees for low balance accounts

Small super accounts with a balance of $6,000 or less at financial year-end will have their super fund fees capped at 3% per annum.

Switching funds without exit fees

Exit fees will be banned, allowing you to switch your super fund without having to pay any penalty or fee.

There are several other new changes coming into effect 1 July 2019, these include:

Significant changes to the non-concessional (after-tax) contribution rules start on 1 July 2019, plus several changes to the threshold and payments for other super and pension areas.

No work test for contributions in first year of retirement

New retirees aged between 65 and 74 will now be able to make voluntary contributions into their super account without needing to satisfy the work test. To qualify you must have had less than $300,000 in your super account at the end of the previous financial year.

The relaxation of the work test rules only applies once and you cannot make contributions in subsequent financial years without meeting the work test. Under the new rules, after age 65 work test-free contributions are only permitted  in the year immediately after the one in which you last met the work test.

Carry-forward concessional (before-tax) contributions start

From 1 July 2019, super fund members can make catch-up concessional contributions into their super account using their unused concessional contributions cap amounts from previous years. To qualify, you must have a Total Super Balance of less than $500,000 on 30 June of the previous financial year and you must not have used all your $25,000 annual concessional contributions cap in the previous financial year.

Under the rules, you can carry-forward up to five years of unused concessional contributions caps for use in a later financial year, but the rolled forward amounts expire after five years.

The five-year carry-forward period started on 1 July 2018, meaning 2019/2020 is the first year in which you can make catch-up contributions. If you are aged 65 or over, the normal work test rules apply.

Age Pension age rises to 66

From 1 July 2019, the age at which you qualify for the Age Pension rises to 66, with the eligibility rising six months every two years until it reaches age 67 for everyone on 1 July 2023.

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